FINANCIAL INSTITUTION STRUCTURES IN A DEVELOPING 2-TIER BANKING SYSTEM - AN EMPIRICAL PERSPECTIVE FROM EASTERN-EUROPE

An empirical analysis of the structure of Hungarian financial institutions reveals them to be very profitable 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 affiliates 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. © 1991.