Abstract

The Changing Banking System of the Centrally Planned Economies

Since the mid-fifties, the credit system of the COMECON countries has undergone substantial changes. Even today, however, the constraints of public ownership of means of production demand fundamental homogeneity of national control systems and of the basic principles of banking in a centrally planned economy. Even largely decentralized responsibility for decisions by individual banks and bank branches cannot create the conditions necessary for development of a money and capital market. However, many aspects of the traditional credit system have been modified considerably. This also applies to the Soviet Union, but much more so to COMECON countries such as Hungary, where the model of the economy has been radically reformed. Here credit seems to function, not so much as an instrument of government control, but more as an economic steering factor. But in the other COMECON countries, too, the administrative functions of credit are being reduced and greater importance attached to customary banking instruments. In the COMECON area the interest rate has regained its social standing. Credit has been extended to the field of investment activities, which were formerly financed almost entirely with national budget funds. In this connection, the investment bank has been incorporated into the central bank everywhere except in the Soviet Union and Roumania. But the attempt made by Bulgaria and the GDR to build up a conventional banking system failed, because the economic system had not created the necessary preconditions.