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One of the most crucial parts of the transition was the decentralization of the banking system, which wiped out the centrally planned Soviet and Eastern European societies. Unlike most banking systems in market economies, the bank in the centrally planned economies acted as administrative agencies and had almost no common features with any commercial bank. These countries had to accomplish hundreds of years of economic evolution in a matter of a few years. In this paper I want to discuss how the command economy banks were decentralized and the causes of bank failure after decentralization. The second aspect I want to talk about is how laws and regulations were used to recover banks failure and eventually lead to a functioning system of commercial banks...
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