Bank Competition in Hungary

Abstract

The Hungarian banking system underwent significant transformation during the last ten years. The early opening of the market, the fairly liberal legislation and the privatisation strategy preferring professional investors brought many foreign banks into the country. Due to the entry of capital-abundant banks, former monopolistic positions eroded rapidly, concentration decreased and the size distribution of the banking system became more even. Beginning from the mid-90s, the effects of cross-border competition also began to show up, especially in corporate markets, where foreign credits became more and more dominant. Do these factors imply that the Hungarian banking sector can be characterised by features of a competitive market?