Potential new entrants to the European Union from Central and Eastern European countries face many challenges to achieve financial convergence with the existing EU nations. Using detailed case studies from Bulgaria, the Czech Republic, Latvia, Lithuania and Poland and analysis of cross country...

Combining panel data on bank liquidity at the individual level and data on their macroeconomic environment, for a sample of commercial banks in emerging countries between 1995 and 2004, we show that there exists a 'bank liquidity smile across exchange rate regimes'. In extreme regimes at both...