ABSTRACT
Chapter 6, authored by Bożena Horbaczewska, gives an account of the most important empirical findings of the subspace clustering exercise in the area of financial intermediation. The author thoroughly explains why the CEE11 countries have not formed their own distinct model of capitalism in this institutional area and why only two clusters (a “bank-based” model and a “market-based” model of financial intermediation) were identified in the European Union. While discussing the key underlying reasons for this result, the author distinguishes between the banking sector and the capital market components of the financial system and emphasizes diverging trends characterizing the development of these two segments of in CEE11 economies resulting in a relative underdevelopment of capital markets in these countries, both compared to their own banking sector and Western European benchmarks. The chapter also points to the most important changes in financial intermediation that occurred between 2005 and 2014 in Central and Eastern Europe, especially after the global financial crisis. It shows that in varying proportions, both convergence and divergence trends of individual CEE11 countries occurred toward the “bank-based” and “market-based” models.
