IMPORTANT FEATURES OF THE SERVICE SECTOR AND TRADE IN SERVICES IN TRANSITION ECONOMIES FINANCIAL SERVICES IN TRANSITION ECONOMIES

Note by the secretariat 1. The financial sector in countries of central and eastern Europe, the Baltics and the CIS has gone through dramatic changes during the transition period. The original State monobank has been replaced by a two-tier banking system across all countries in the region, and a considerable number of private commercial banks have emerged. The end of the 1980s – 1990s has witnessed the re-emergence of capital markets nourished by the privatization of State-owned enterprises and the inflow of foreign investment. Domestic, and, despite restrictions, foreign insurance companies have become increasingly important players on domestic financial markets. 2. Despite considerable progress, the financial services sector in many transition economies remains underdeveloped, commercial banks and other financial institutions being largely under-capitalized and small by western standards. According to recent research, at the end of the 1990s the aggregate values of bank deposits, outstanding corporate debt and stock market capitalization in relation to gross domestic product (GDP) in transition economies stood on average at 34 per cent, whereas the non-weighted average for OECD countries made up 198 per cent. 1 GE. 01-TRADE/2001/1/Add.