GEOFIN Working Paper No. 11

Pataccini, L. (2020) Western Banks in the Baltic States: a preliminary study on transition, Europeanisation and financialisation. GEOFIN Working Paper No. 11. Dublin: GEOFIN research, Trinity College Dublin.


Since the restoration of their independence from the USSR, in 1991, the Baltic states of Estonia, Latvia and Lithuania have gone through a tortuous process of ‘transition’ to establish market economies and join the European Union. However, the Baltic states represent a unique case among the transition economies of East-Central Europe (ECE) due to several factors. First, to date, they are the only former Soviet republics that managed to join the European Union. Second, since the beginning of the transition, these countries have experienced more marked boom and bust cycles than the other ECE economies. Third, the banking sector in the Baltics displays one of the highest rates of foreign penetration in the world.

Therefore, the Baltic states represent an ideal case to understand the role of Western banks in ECE and the new geographies of financialisation. Accordingly, this paper aims to analyse the main developments of the banking sector in the Baltic states. The research shows that the conditions imposed by the processes of transition and Europeanisation, as well as the role of foreign financial agents (fundamentally the role of the banking sector and FDI) have been the key factors in shaping capitalism and promoting the rise of financialisation in the Baltic states.

Keywords: East-Central Europe; Baltic states; transition; Europeanisation; financialisation; banking sector.