The main role of markets is to allocate inputs and outputs to their efficient use. The system of markets can however only fulfil this function if prices emerge through the interaction of demand and supply and not according to political objectives.
Stabilization entails two elements: creating a stable and convertible currency, and reducing budget deficits and accumulated debts.
In a market economy, banks fulfil a number of important functions: they collect savings and allocate them to the most efficient firms; they facilitate payments and thus reduce transaction costs; and they impose financial discipline on firms and households.
This part of the handbook provides some background for Western bankers and consultants who may not always be acquainted with the specificities of banking in the CIS. Figure 1 presents our approach to the understanding of banking in transition.
EBTRA was created in order to increase the efficiency of these projects by providing a platform for the cross-fertilization and co-ordination of financial services projects in the CIS through the organization of seminars and conferences, and by developing and distributing materials that enhance training, consultancy and twinning activities.
