Abstract:

Proponents of foreign direct investment (FDI) argue that FDI can be a major trigger for the growth of the real economy in the host country; however, they are not as keen-edged when it comes to FDI in the financial-banking sector, and numerous examples from Central and Eastern European (CEE) countries from the last decades more than prove these contradictions in the ways of thinking concerning FDI. Researches has identified a number of positive aspects brought by foreign banks, such as: better risk-management, improved knowledge transfer, products and management techniques, innovative ways to increase financial intermediation, improved resource allocation, institutional development, employment opportunities, attracting additional FDI. In the same time, we acknowledge that the effects of FDI on the domestic financial institutions and the increase of competition that will ultimately lead novel and cheaper financial services for consumers are ambiguous, and identifying of possible long-term effects upon developing economies is difficult. This papers aims to examine the impact concerning the presence of foreign banks in several countries in CEE (Romania, Hungary and Bulgaria), to understand whether and how foreign participation in the banking sector of these countries has or has not had an effect upon the economic growth, and, respectively, to identify and understand the effects upon the availability and costs associated with the crediting of the private sector. We are interested in and concerned with finding out whether there are any particularities and associated developments, varying and differing from country to country, and whether events such as the recent economic and financial crisis or reaching a dominant threshold of a foreign presence in their domestic banking systems have conclusively changed the behavior of foreign banks in relation to the economic evolution and the private sector from these countries.