Financial institution structures in a developing two-tier banking system: An empirical perspective from Eastern Europe

Journal of Banking and Finance 15 (1991) 1131-1142. North-Holland

Financial institution structures in a developing two-tier banking system: An empirical perspective from Eastern Europe A. Murphy*

2;. Sabov Freie ~~~~er~it~t Berlin, O~teuropa-l~stitut,

Berlin, Germmy

Received September 1990, final version received February 1991

An empirical analysis of the structure of Hungarian financial institutions reveals them to be very prolitable across all groupings. Although capital and liquidity ratios are, on average, low in comparison to West German standards, the capital adequacy problems appear to be concentrated in the former alliliates of the central bank. The thinness and underdevelopment of the Hungarian securities market may hinder the capacity of the institutions to raise liquidity and capital ratios, as well as inhibit the emergence of competitors seeking high levels of profitability.

With the radical political and economic changes occurring in Eastern Europe, countries with centrally planned economies are beginning the transition to market-oriented systems, and, as a result, significant changes in banking structure are needed. According to Worth (199(I), ‘the natural role of banks in the transition is to facilitate the replacement of central plans of financial inte~ediation and to do this in a way as to bring to bear market forces in the process’. An adaptation of a centralized one-tier state banking organization to a decentralized two-tier system with private depository institutions that are independent of the central bank is often assumed to be required for the transformation [e.g., Zwass (1979) and Hetzei (199O)J Although the macroeconomic importance of developing an effective financial system in a country has received a great deal of attention in the economic literature, as reviewed by Gertler (1988) and Asztalos, Bokros, and Suranyi (1984), sufficient data to permit an empirical study of the actual financial *The author was a Fulbright Professor at the Freie Universitlt written. 0378~266/9t/$O3.50 @ 1991-Elsevier

Berlin when this article was

Science Publishers B.V. (North-Holland)

1132

A. Murphy

and Z. Sobor,

Financial

institution

strucfures

characteristics of a transforming Communist banking system are only now becoming available. As the vanguard in the East European reform process, Hungary provides a fertile field for the investigation of the structure of financial institutions in a two-tiered banking system in the process of being transformed from a centralized framework. In the following sections, the transition process of the Hungarian financial system is described, testable hypotheses and data are defined, the empirical results are stated, and the findings are summarized. 1. The development

of two-tier Hungarian

banking

After the second world war, a centrally planned economy was imposed in Hungary, and all banks were nationalized and placed under the direct control of the state central bank. Proposals to change the resulting one-tier banking system were made as early as 1968, but it was not until 10 years later that major banking reforms began to be seriously considered by the Hungarian government [Antal and Suranyi (1987)]. In the period between 1968 and 1978, only minor modifications in the system were permitted. The most important of the decade’s changes included amending the duties of the central bank to require financial analysis of the credit worthiness of all loan applicants for the first time (although loans could still be made for strictly political or macroeconomic motives) and setting loan interest rates as a function of bank costs of funds that included newly offered medium-term deposits [Bacskai (1989)]. At the end of the 1970s a governmental decision was made to decentralize the economy. As a result, the first steps in the direction of a two-tier banking system were begun.’ For instance, independent foreign banks were allowed to establish branches to support foreign trade and currency transactions in Hungary in 1979. In addition, in the early 198Os, many small domestic financial institutions were created that were controlled by the Hungarian government but were independent of the central bank. These latter institutions specialized in risk financing, securities issue, factoring, leasing, and loan guarantees. However, for all these new institutions, funding of large operations and loan generations were inhibited by restrictions on deposit acceptance [Antal (1989)]. Later in the 1980s. the economic environment for a successful two-tier ‘Even with a decision made to decentralize the economy, some Hungarian oflicials continued to argue in favor of one-tier banking because of the advantages of greater control, but the government finally decided that adequate conditions for etlicient capital allocation and economic competition required development of a two-tier banking system [Antal and Suranyi (1987)]. For instance, a government resolution of May 1984 stated ‘the businesslike character of crediting must be strengthened’ and ‘considerable effort must be made to increase efficiency in overall capital allocation’ [Bokros (1987)]. Contrary arguments on the issue of centralized financial decision-making can be found in Murphy (1990).

A. iMurphy and Z. Sabov, Financial

institution

structures

1133

decentralized financial system was further developed. For instance, a government bond market that was initiated in 1981 was expanded to permit the sale of company debentures in 1983, a market for company equity began to develop in 1984, bills of exchange were allowed in 1985, and a law permitting company bankruptcies was passed in 1986 [Bacskai (1989)]. Finally, on January 1, 1987, the major step in the development of a twotier banking system occurred as the central bank divided its commercial banking activities into 5 separate banks. The initial allocation of the old central bank commercial branches, customer accounts, loans, and deposits was along sectoral lines (as opposed to geographical), with the 5 categories consisting of heavy industry, infrastructure, agriculture and domestic trade, foreign trade, and miscellaneous accounts. On July 1, 1987, the 5 newly created banks received their official independence from the central bank by being granted discretion in decision-making [Bokros (1987)]. However, the newly independent banks were still plagued by numerous restrictions. For instance, they were at first not allowed to offer depository services to individuals (thus allowing the central bank to retain its monopoly on providing individual depository services through its directly controlled National Savings Bank) and, later, only with interest rate ceilings below market rates and without an initial retail branching network [Gyenis (1990b) and Body (1987)]. Moreover, the three largest banks were crippled with a heavy allocation of debts to the central bank that were required to refinance their inherited assets. Besides bearing higher interest rates than deposit funding, the maximum amount of these refinancing credits to any bank was still tightly controlled by the central bank, which could use the banks’ assigned dependence on such funding to directly influence the purpose, type, and amount of new loan activity [Bokros (1987)]. Competition for alternative deposit financing was initially limited by an assignment of branches that resulted in local banking monopolies in half of the regional capitals in Hungary [Bokros (1987)]. The central bank also continued to tightly control foreign exchange transactions,’ and the state maintained its arbitrary and unlimited taxing powers [Bokros (1987)]. In addition, the 5 former affiliates of the Hungarian central bank were assigned its then existing loan portfolio. According to many analysts, the quality of the central bank’s old loan portfolio was extremely poor, with as 2According to Czege (1989). a two-tier banking system is also important for the process of decentralizing hard-currency allocations that has begun in Hungary. For instance, since May 1989, Hungarian banks have been allowed to engage in spot and forward currency contracts with the Hungarian central bank for the benefit of their customers. Although the actual exchange rates continue to be controlled by the central bank, these rates are heavily dependent upon relative interest rates, with forward-spot relationships being largely set as a function of interest-rate parity. In addition, as a prelude to a completely market-oriented exchange rate, a legal interbank market for excess foreign currency has begun to develop because of laws preventing the hoarding of excess foreign exchange.

JBF.-i-J

1131

A. ~Murphy and Z. Sobor,

Financial

instirution

structures

much as 30?4 of the loans potentially being substandard [Gyenis (1990a)J and with write-offs possibly being required to be as high as 10% in the future [Seboek (1989)J The combination of bad loans and expensive funding would tend to put these banks at a competitive disadvantage to other Hungarian financial institutions. However, the existence of temporary customer monopolies might partially offset this problem by allowing these banks to recoup the penalties to income through lower rates paid on deposits and higher returns earned on loans and bank services. Customer attempts to circumvent the monopolistic bank control of commercial financial services are hindered by the somewhat undeveloped nature of the Hungarian securities market, over which Hungarian banks also have monopolistic power that permits expensive pricing of investment banking services.3

2. Testable hypotheses and data The foregoing scenario of a developing two-tier bank system leads to several interesting hypotheses. For instance, the continued leverage on the 5 former affiliates by a central bank not yet independent of the Hungarian government can still be used to force loans to be made for political and macroeconomic goals as opposed to for reasons related to credit analysis [Bokros (1987)]. In addition, pressure can be applied to impel banks to set interest rates artificially low. The initial allocation of non-earning assets and expensive liabilities from the central bank might further harm the bottom line of these banks. Although their monopolistic commercial branch positions and customer contacts might enable them to more than cover these additional costs, the independent financial institutions in Hungary not plagued with these problems might be expected to be more profitable. Returns on branches of and joint ventures with foreign banks might be even more lucrative due to the potential for tapping foreign expertise, experience, banking contacts, and capital. In addition, the stock of Hungarian financial institutions continue to be heavily controlled by the state, and so these enterprises might be expected to be bailed out in the case of financial distress [Figyeloe (1986)]. With greater protection against bankruptcy, these institutions might be able to comfortably exist with greater risk and therefore be able to operate with less capita& less low-earning liquidity reserves, and more higher-yielding loans. Because the implicit protection against bankruptcy might be the greatest for the exafftliates of the central bank, which might also have inherited risky financial 3For instance, the average underwriting fee for new bond issues is 0.5% up front, plus 25-100 basis points per year for the life of the bond [Szanto (199Ob)]. These fees seem high in comparison to single up-front fees in the U.S. that average 1.2”/, of the issued amount [Dyl and Joehnk (1979)].

A. Murphy

and 2. Saber. Financial

institution

structures

1135

positions, these hypothesized effects might be expected to be the strongest for these institutions. Moreover, the ability of Hungarian financial institutions to raise equity capital ratios might be inhibited by the embryonic nature of the Hungarian security market that can lead to limited demand for and inefficient pricing of Hungarian bank stocks [Agtmaei (1989)]. For instance, market capitahzations of bank companies might be heavily influenced by book values in an underdeveloped stock market, and dividends and other important fundamental factors might be expected to begin to affect equity prices only when the stock yields rise above those on competing investments [Agtmael (1989)]. To test these hypotheses, data can be gathered from several sources. In particular, balance sheet ratios on aggregated 1988 data for all the Hungarian banks that had sold bonds to the public prior to 1989 through the largest investment bank in Hungary (the Budapest Bank) can be obtained from the June 22, 1989 issue of the Hungarian periodical Figyefoe. In order to prevent the analysis from occurring in a vacuum, these ratios can then be compared with a 17-year time series of the aggregate balance sheet ratios for all West German tinancial institutions reported annually between 1972 and 1988 by the German central bank in Frankfurt in ~o~a~~~e~jc~~ der Deutschen Bundesbank. West German banks are chosen for the comparison because of the often stated intent of reforming Eastern European countries to follow the West German example [Der Tagesspiegel (1990) and Nepszabadsag (1990)]. Differences between the Hungarian ratios and the West German time series means can be tested for significance at the 0.10 level with t-statistics. In addition, a breakdown of Hungarian capital and profitability ratios by individual financial institutions for 1989 can be obtained from the May 24, 1990 issue of Figyeloe. The banks are grouped into separate categories, including 5 affiliates of foreign banks, 5 former central bank affiliates, and 13 independent domestic financial institutions. The financial ratios of these groups can be compared with analysis of variance (ANOVA) F-statistics. For an analysis of the market for bank equity, data for the last week of May in each of the 3 years 1988-1990 for a cross-sectional sample of all bank stock prices listed in Figyeloe and Heti Vilaggazdasag can be obtained. The logs of these prices can be regressed on the logs of fundamental factors like book value, earnings, and dividends [Durand (1957)] that are procured from bank annual reports and the Hungarian press. In addition, equalweighted indexes of Hungarian stock prices and bond yields for each of the dates can be computed from the listings in the two Hungarian periodicals and included as logged independent variables in a separate regression. Before conducting the analysis, some qualifying remarks must be made on the financial statement data used in the tests. In particular, Hungarian accounting standards, though similar to West German and other capitalist

A. Murphy

1136

and Z. Saboc. Financial

of balance

sheet

ratios

for Hungarian assets).

and

West German

West German Hungarian 1988

structures

1

Table Comparison

institution

banks

(as a percent

of

1972-1988

West German 1988

Mean

Std. dev.

r-statistic

Range

15.99% 2.390/, 13.60% 54.31% 2.01% 27.69%

14.685, 3.47% 11.229, 56.35% 2.11:; 26.87;;

0.77 1.00 1.45 1.99 0.10 1.80

4.78, 6.03* 6.70* 6.10* 20.90; 5.87*

13.16-15.993,; 2.39- 5.43%) 8.80-13.60%) 54.07-60.67% 1.82- 2.23% 22.83-29.07x

71.07% 5.47% 23.45% 19.80”/, 3.65%

70.367; 5.29% 24.377; 20.95% 3.43%

1.80 1.25 1.02 1.02 0.12

0.15 8.89* 11.34* 17.25; 59.75’

67.63-73.90% 1.37- 6.71% 22.95-26.08x 19.63-22.74%) 3.26- 3.67%)

Assets = loo”/, Liquid reserves (Cash (Marketable securities Loans Fixed assets Other assets Liabilities

I l.OOo/, 9.sog; 1.500,:, 68.50”’ 4.2&,; 16.30:/,

and capital = 100%

Deposits Other liabilities Total capital (Debt capital (Equity capital

70.80% 16.40”/, 12.80% 2.20% 10.60%

*Indicates a statistically significant difference German time series mean at the 0.10 level.

between

the

Hungarian

ratio

and

the West

conventions, are not as strict. For instance, no standards have yet been set on bad loan write-offs, and, as a result, the total amount of these losses are only arbitrarily reflected in Hungarian income and capital accounts [Canto (1990b)l. Although bad debt reserves of several percent have reportedly already been built for at least one former central bank affiliate [Seboek (1989)], the amount may represent only a fraction of actual future write-offs, and other Hungarian banks may be using more or less conservative practices. In addition, tax payments are often not reported, and only pretax data are available. Instructive comparisons must take these data limitations into consideration just as somewhat arbitrary decisions to write off loans, especially those to developing countries, would have to be considered in any comparison of U.S. banks.

3. The empirical results The results of the empirical comparison of Hungarian and West German banks are shown in table 1 and indicate that Hungarian banks have significantly lower levels of liquid reserves (cash and marketable securities). The Hungarian bank holdings of other assets, which include other liquid investments like acceptances not included in the market securities account, are also significantly lower than for the West German banks. Hungarian

A. Ilfurph_v and 2. Saboc. Financial institution structures

1137

holdings of potentially higher-earning illiquid assets like loans and fixed assets are significantly higher than for their West German counterparts.* It is also interesting to observe that Hungarian banks have significantly more of their liquid reserves tied up in non-earning cash assets than their West German counterparts. However, as opposed to implying inefficient cash management operations, this finding can be attributed to higher reserve requirements for Hungarian financial institutions (207, for short-term and 10% for long-term deposits) than for West German banks [Szentivanyi (1988, p. 276)]. In addition, as opposed to indicating a propensity to accept greater liquidity risk, the limited holdings of liquid investments by Hungarian banks may stem from the existence of an underdeveloped market for acceptances and other short-term securities in Hungary [Bokros f 1987)]. Table 1 further shows that Hungarian banks have significantly less capital than West German financial institutions. However, it is important to draw attention to the fact that Hungarian bank capital has a large equity weighting, which at over 10% of assets greatly exceeds both regulatory minimums of 4% in Hungary [Szentivanyi (1988, p. 316)] and normal ratios of under 5% in developed countries [Forgacs (1987)]. The large equity component of Hungarian bank capital also stands in contrast to the heavy reliance of West German banks on debt capital. The cause of the dependence of Hungarian banks on low-risk equity capital (largely obtained from state allocations) might be the existence of an underdeveloped securities market in Hungary that reduces the ability of Hungarian tinanciaf institutions to issue debt. The greater use of debt capital with mandatory interest payments that must be earned might tend to force West German institutions to be more eflicient than enterprises with greater equity cushions [Jensen (1986)]. Examination of Hungarian bank income statements revealed an average pre-tax return on assets (ROA) for Hungarian financial institutions of 4.3% in 1989. This result compares favorably with those typically found in western capitalist countries [Czirjak (1990)]. For instance, pre-tax returns on assets were under 1.0% in each of the years 1984-1989 for each of the three largest West German banks. Tax rates averaging approximately 50% in both countries imply that West Germany bank after-tax returns might also be less than one quarter of those reported in Hungary. Although Hungarian banks are not subject to the same conservative rules on write-offs of overdue loans as western banks [Szanto (1990b)l and thus have a lower quality of earnings, the combination of write-offs and reductions in accrued interest on nonperforming loans would have to exceed 3% of assets (4% of loans) in order to equalize the profitability levels. In particular, with average interest rates on loans of approximately 20% (according to data reported in Figyeloe), the 4The higher fixed assets/assets ratio for Hungarian banks might imply either relatively more bricks and mortar or slower depreciation rates.

1138

il. ,Glurphy and Z. S&X,

Financiul Table

Internal

group

comparison

(domestic

Ex-central Independent ANOVA F

domestic

Domestic Foreign ANOVA

bank Gnancial --

ratios. Pretax prolit: assets

Pretax profit/ equity

Assets”

Equity, assets

129.786 8,341 42.4s

8.68”, 24.02”, 4.8s*

3.9400 5.97”,

1.08

51.1 t”/, 30.28”” 3.36*

129.786 6,270 31.20*

8.680, 27.970, 7.09%

3.94”, 6.35”,, 1.10

51.11”” 23.59”,, 12.15*

40,580 13,725 0.7

5.679, 5.OiP” 0.11

31.13’7’ 48.03:‘:

1

22.61”” 13.75p, 1.40

6,270 13.725 10.34,

27.97:‘, 13.75”; 3.62*

6.34’, S.OlO, 0.33

23.45”, 48.03”,, 5.33;

129,786 13,725 9.57*

8.68”,” 13.757, 1.99

3.94” ’ 5.01:: 3.34

48,03u/, 0.03

and foreign)

F

Independent Foreign ANOVA F

stru~rures

2

of Hungarian _.

Ex-central Independent ANOVA F

instirution

domestic

Ex-central Foreign ANOVA F ’ In millions of Forints. *Indicates at the 0.10 level a statistically groups of institutions.

signiIicant

difference

between

the ratios

2.09

51.11%

in the two

amount of non-performing loans still accruing interest would have to exceed 15% of total loans in order for conservative accounting adjustments to cause Hungarian bank ROAs to fall to the level of their West German counterparts (i.e., such figures, combined with a conservative write-off rate 1% higher than currently used, would indicate reducing income by an equalizing [O.ZOx O.tSJ + 0.01 = 0.04 of foans). Such adjustments might be warranted for some of the former central bank affiliates that are still accruing interest on many of their inherited bad loans [Szanto (1990a)], but the level of adjustments for the foreign and smaller institutions would be expected to be less. The cross-sectional analysis of Hungarian banking groups is shown in table 2.5 As can be seen, the financial institutions that were transformed from control of the Hungarian central bank are larger than their independent competitors in terms of assets. Contrary to expectations, however, the ROA figures reveal no significant difference in profitability for the 2 sets of institutions, and significantly lower levels of equity capital result in the former central bank affiliates actually having higher returns on equity (ROE). 5With the exception of finding no signi~cant difference between the ROES on foreign and independent domestic institutions, the same statisticai conclusions were reached with MannWhitney U-tests, and so these separate statistical resufts are not reported.

1139 Table 3 Summary

financial

Price/book Dividend yield Price,‘pretax earnings Stock index Bond yields

characteristics and environment bank stocks (1988-1990).

for Hungarian

1988

1989

1990

1.03 X 12.43”” 2.72 X 100.00 13.61””

1.03 X 9.80”; 4.53 x 109.43 16.10”,

0.79 X 13.0196 2.01 x 113.71 32.80’”

There is therefore no significant evidence that the profitability and competitiveness of the former central bank afliliates have been overly penalized by their inherited asset and liability structure. Similar results were obtained when the group of foreign affiliates were excluded from the sample of independent competitors. However, the continued accrual of interest on some non-performing loans might be inflating the reported profitability of the former central bank affiliates. The comparison of the grouping of all purely domestic Hungarian banks with foreign-afftliated institutions operating in Hungary also shown in table 2 reveals no statistically significant difference between the two sets of banks. Further comparisons, however, indicate the characteristics of the foreign banks to lie between the two different groups of domestic banks. The foreign banks are significantly larger (smaller) than the independent institutions (former central bank affiliates), have less (more) equity as a percent of assets, earn insignificantly lower (higher) ROAs, and have higher (insignificantly lower) ROES. Thus, there is little evidence of foreign banks being any more efftcient or profitable than their domestic competitors or of these banks dominating Hungarian financial markets through greater size or capital. Overall, the use of more equity capital by the independent Hungarian financial institutions, both domestic and foreign affiliated, provides some evidence of significant risk aversion for these entrepreneurs and provides no evidence that their managers feel greater security from bankruptcy risk. The high capital ratios are more consistent with institutions in a monopolistic position seeking to minimize risk and the chance of bankruptcy ending a long stream of excessive monopolistic profits [Pyle (1986)]. The concentration of low capital ratios in the former central bank affiliates may stem from the inherited capital structures and from the inhibitions on increasing capital ratios that are imposed by an illiquid security market. A summary of the financial characteristics and environment for Hungarian bank stocks is provided in table 3. As can be seen, Hungarian bank stock dividend yields remain below those available on competing bond investments. Earnings yields, as measured by the inverse of price/earnings ratios,

1140

A. Murphy

and Z. Sabor.

Financial

institution

structures

Table 4 Relationship

Intercept Book value Earnings Dividends Stock market Bond yields

between

bank

stock prices and fundamental

variables”

(1988-1990).

First regression

Second

Parameter estimate

(t-statistic)

Parameter estimate

(r-statistic)

5.87 -0.32 -0.03 0.17

(4.28;) (1.02) (0.48) ( I .40)

- 2.58 0.15 0.03 0.02 1.62 - 0.40

(1.16) (0.65) (0.99) (0.27) (3.08*) (8.03’)

index level

R-squared F-statistic

_

_

0.22 0.82

“For all variables, logs of the values are used, although materially affected by use of the unlogged values. *Signilicant at the 0.10 level.

regression

0.85 8.03* the significance

of the results

was not

were also lower than bond yields in 1989 and 1990, if an average 50% tax rate is applied to the available pretax figures. Data on turnover revealed the market to be extremely illiquid, with less than $10 million per year in total stock market volume (that can be compared to an aggregate Sl billion in equity book value for Hungarian financial institutions). The regression of Hungarian bank equity prices on the various fundamental variables is shown in table 4. This analysis indicates bank stock prices to be unreleated to all of the fundamental financial factors that should and do affect bank stock prices in a developed market [Durand (1957)]. The regression that included the level of the stock market and interest rates revealed a strong statistical relationship between bank stock prices and these two additional variables.6 The parameter estimates of over one for the stock market variable provide some evidence of higher than average systematic risk for bank stocks, while the negative coefficient for bond yields indicates bank stock prices to be adversely affected by interest rate increases. The significant positive (negative) relationship found between bank stock prices and the level of the stock market (interest rates) is similar to that discovered in the more developed U.S. market for bank stocks [Lynge and Zumwalt (1980)]. However, the lack of any significant relationship between stock prices and fundamental financial statement data provides some evidence of an immature system of accounting and investment analysis. Such a situation often occurs in illiquid embryonic markets where accounting tigures are unreliable and dividend yields remain below those on competing investments [Agtmael ‘Breusch-Pagan tests (1979) for yielded chi-squared statistics of 0.98 these statistics are insignilicant at heteroscedasticity is indicated, and so

heteroscedasticity relative to the independent variables and 2.03 for the respective regressions. Because both of the 0.10 level, acceptance of the null hypothesis of no ordinary least squares (OLS) was employed.

A. Murphy

and 2. Sahoc, Financial

institution

structures

1141

(1989)]. An underdeveloped stock market of this type cannot only inhibit the raising of capital ratios by existing banks for purposes of expansion but may also represent a formidable barrier to entry for entrepreneurs seeking to exploit a banking market with excess profits. 4. Conclusion This research investigates the financial characteristics of newly created financial institutions in a two-tier banking system in the process of transition from a centralized Communist financial structure. The findings provide an interesting perspective on an embryonic financial system whose further development along western lines may be hindered by an underdeveloped securities market. For instance, profitability ratios are found to be fairly high in Hungary across all groups of financial institutions, including domestic independents, foreign affiliates, and former central bank affiliates. This finding is consistent with a lack of sufficient competition in Hungarian banking. Competitors seeking to exploit this situation may be inhibited from expansion or entry by the existence of an underdeveloped market for new bank equity. In addition, the evidence on capital structure indicates that the Hungarian financial institutions are, on average, less well-capitalized and more illiquid than counterparts in West Germany. The low capital ratios are concentrated in the former afftliates of the Hungarian central bank and may reflect their limited capacity to change an inherited capital structure because of an illiquid securities market. The cause of the low holdings of liquid investment reserves may also be traced to the embryonic structure of the securities market where a sufficient volume of acceptances and short-term debt instruments may not exist. References Agtmael, A., 1989, Securities markets in developing countries, International Finance Handbook. Antal, L., 1989, The beginnings of a capital market in Hungary, Financial reform in socialist economies (World Bank, Washington, DC) 133-146. Antal, L. and G. Suranyi, 1987, The prehistory of the reform of Hungary’s banking system, Acta Oeconomica 38, 35-48. Asztalos, G., L. Bokros and G. Suranyi, 1984, Reform and financial institutional system in Hungary, Acta Oeconomica 32, 251-268. Bacskai, T., 1989, The reorganization of the banking system in Hungary, Financial reform in socialist economies (World Bank, Washington, DC) 73-84. Body, L., 1987, A bankreform felevi merlege, Figyeloe, July, 30. Bokros, L., 1987, The conditions of the development of businesslike behaviour in a two-tier banking system, Acta Oeconomica 38, 49-60. Breusch, T. and A. Pagan, 1979, A simple test for heteroscedasticity and random coefficient variation, Econometrica 47, 1287-1294. Czege, A., 1989, Ungarns Integration in die Weltwirtschaft: Vision oder Alptraum?, Aussenwirtschaft 44425-452.

1142

A. Murph_v and Z. Suboc, Financial

institution

structures

Czirjak, G., 1990, A magyar bankrendszer kerdoejelei, Figyeloe, Mar., 15. Der Tagesspiegel. 1990, Prag strebt soziale Marktwirtschaft nach Vorbild der Bundesrepublik an, Mar., 2. Durand, D., 1957, Band stock prices and the bank capital problem (NBER, New York). Dyl. E. and M. Joehnk. 1979, Sinking funds and the cost of corporate debt, Journal of Finance 35, 887-893. Fekete, J.. 1982, Banking in Hungary, Back to the realities (Akademiai, Budapest) 301-312. Figyeloe, 1986, Mozgasban a bankrendszer, Dec., 18. Forgacs. K., 1987, Bankverseny Ausztriaban, Figyeloe. Nov., 5. Gertler, M., 1988, Financial structure and aggregate economic activity: An overview, Journal of Money, Credit and Banking 20. 559-588. Gyenis, A., 1990a, AZ allamadossag nem lehet toebbe a politika jatekszere, Vilaggazdasag, May, 4. Gyenis. A., 1990b. Kamatcsapda - avagy realis-e a 35 szazalek?, Vilaggazdasag, June, 6. Hetzel, R., 1990, Free enterprise and central banking in formerly communist countries. Economic review of the Federal Reserve Bank of Richmond, May/June, 13-20. Jensen, M., 1986, Agency costs of free cash flow, corporate linance, and takeovers, American Economic Review 76, 323-329. Lynge, M. and J. Zumwalt, 1980, An empirical study of the interest rate sensitivity of commercial bank returns: A multi-index approach, Journal of Financial and Ouantitative .. Analysis 15, 73 l-742. Murphy, A., 1990, An analytical comparison of business financial decision-making in the East and the West: The German case. Paper presented at the 1990 HU-FU Berlin conference on financial management in socialist countries. Nepszabadsag, 1990, A kormany szocialis piacgazdasagot iger, May, 23. Pyle, D., 1986, Capital regulation and deposit insurance, Journal of Banking and Finance IO, 189-201. Seboek, E., 1989, Kard el nelkuel. Figyeloe, June, 1. Szanto, A., 1990a, A Magyar Hitelbank merlege: Nem csalas, csak amitas, Heti Vilaggazdasag, Oct., 27. Szanto, A., 1990b. Banki Merlegek, Heti Vilaggazdasag, Apr., 21. Szentivanyi, I., 1988, Bankjog (Koezgazdasagi es Jogi, Budapest). Worth, N., 1990, Eastern Europe: The tough road from a centrally planned to a market economy, IMF Survey 19, 134. Zwass, A., 1979, Money, banking and credit in the Soviet Union and Eastern Europe (Macmillan Press, White Plains, New York).