Polish bank consolidation and foreign competition: Creating a market-oriented banking sector

The characteristics of the 19 largest Polish banks are presented and the current structure of the banking sectors in Poland, Hungary, and the Czech Republic are compared as background for analyzing Polish banking consolidation. After the political arguments are considered, an economic case is made for creating larger domestic banking groups. The government's consolidation proposal is analyzed and found to be insufficient to meet these political and economic objectives. A more comprehensive consolidation plan is suggested. It is argued that, by combining consolidation with foreign competition, a market-oriented banking sector can be created in Poland. (C) 1996 Academic Press, Inc.