Globalization is a phenomenon with multiple faces and expressions. It is impossible to capture the essence of globalization in its entirety for it is to be viewed from more than one perspective – as the alternative world order after the Cold War, as the power behind sweatshops in Bolivia or as the force that brings one Coke in Pakistan. I will give a working definition of globalization identifying the aspects of it that will be the main focus of this paper. Globalization is looked upon as a process during which units are exposed to the exogenous influence of factors such as predominant political theory (capitalism), local powers (EU), and international powers (IMF), thus making the initial units uniform or at least compatible with the existing global system. In this sense the Czech Banking Sector is a unit. Before 1989 it was protected from external dynamics through the solidity of the Iron Curtain. The Revolution in 1989 exposed it to the newly evolved phenomenon of Globalization.

During the past ten years transformations occurred that changed drastically the appearance of the Czech Banking System. There are three general phenomena underlying the globalization process, which are not necessarily distinct and often overlap each other, but which should be considered independently because of their dissimilar origin. These are capitalization, europeanization and internationalization of the banking sector. The derivation of the terms is logical: capitalization is the process of transition of the economy from central planned to market regulated system; europeanization is the procedure of modifying the Czech banks in a manner standardized with the European Union criteria; and internationalization consists of the courses of action taken to make the banking sector compliant with the IMF regulations.

Each of these phenomena is a smaller phenomenon within a grand phenomenon, which in this case is the process of globalization. However, as the smaller phenomena contain ever-smaller phenomena within themselves (e.g. capitalization contains privatization), so is the grand phenomenon included in an ever-greater phenomenon, which I am going to name Universalization. Thus we are not in the final phase of integration of values and cultures, nor are we at the beginning, but somewhere in the middle. As Pascal says ‘humanity exists somewhere between the infinitely small and infinitely large’. So does Globalization.

The essence of the next step we shall establish by the end of this paper on the basis of the following analysis. By introducing the concept of Universalization this paper emphasizes the fact that Globalization is not ultimate, and cannot be blamed for all the wrong in the world yet should not be underestimated.

What are the processes underlying the development of the Czech banking sector? Why is the Czech economy lagging exactly in this aspect of its transition to a market economy? What should be done to improve the banking sector’s performance? What is the opinion of reverential organizations such as the EU and IMF?

The forces pressuring the Banking Sector of the Czech Republic to perform changes in its economy are internal and external. The internal factor is the reality that the economy is growing slowly and the unemployment rate is rising. The external force is the influence of the capitalist countries, which determine the policies that the Czech Republic should enact in order to enhance its productivity growth, decrease its unemployment rate, and improve the rest of its economic indicators.

The Czech Republic started out ahead in the run towards transitioning to a market economy. It was, and still is, considered one of the best performing emerging economies. However, it has begun to lose its lead due to insufficient structural reforms. One of the main reasons for this is ascribed to the difficulties in the banking sector. As the IMF concludes, the immediate cause of the recession of 1998 in Czech Republic was the prolonged tightening of fiscal and monetary policies (high taxes and high interest rates) in response to the widening imbalances and the resulting currency crisis in early 1997. However, serious structural deficiencies are at the root of the problems. Weak corporate governance in the state-controlled banks resulted in the channeling of the large capital inflows received in the mid-1990’s into excessive credit growth.

The banking system of Czechoslovakia was in every way similar to the banking system of other Communist countries. It consisted of a Central bank – which issued money and handled all financial transactions between state-owned enterprises, and of three subordinate banks with limited functions. Two of the banks were commercial banks with specialized functions, and the third one was a national savings bank that collected the savings of the people and transferred them to the central bank. The central bank was in charge of the implementation of the national financial plan, the purpose of which was to adjust the supply of money to the real national physical output plan.

Due to its low fiscal debt and high GDP the Czech Republic had easy time undertaking banking reforms. In 1990 the previous mono-bank system was transformed into a system of a central bank and a network of commercial banks. The Central Bank of Czechoslovakia formally gained independence from the government in 1991. There was a problem with the debt accumulated by the state enterprises because of their inefficiency. To ease this situation in 1991 the Consolidated Bank was created in order to manage the debt by providing credit to indebted enterprises. Major banking reforms were initiated in the same year with the passage of the Banking Act and the State Bank Act. In 1993 the stock market was successfully introduced in Prague. A new banking system evolved. A brief history of the creation of the Czech National Bank follows.

On November 15, 1989 the Act of the Collection of Laws on the State Bank of Czechoslovakia was adopted by the Federal Assembly of the Czechoslovak Socialist Republic, which set the conditions for the development of the Czech banking sector. At the beginning of 1990 only six commercial banks existed in CSFR (Czechoslovak Federal Republic). By the end of the year that number rose to fourteen, and by 1991 the number of commercial banks increased to thirty-nine. The State Bank of Czechoslovakia was in charge of them all. However, as the tendencies towards a split of the state into two independent republics strengthened there was a need for the establishment of a new central bank to serve the economy of the Czech Republic. In October 1992, the Federal Assembly of the CSFR adopted an amendment to the Constitutional Act on the Czechoslovak Federation that became the legal basis for the establishment of the Czech National Bank as the central bank of the Czech Republic. This amendment allowed the republics to create their own independent central banks. January 1^st 1993 was the official day of the dissolution of the Federation and of all its bodies. The State Bank of Czechoslovakia was dissolved on that day and the Czech National Bank overtook the functions of a central bank. Its main objective was the keeping of a stable currency. The Act on the Czech National Bank was adopted in December 1992 and took effect on January 1^st 1993. It was based on the former Act on the State Bank of Czechoslovakia and took into consideration the legal norms of other countries and the proposal for a European system of central banks. The organizational structure of the CNB was created anew. It is composed of its headquarters in Prague, seven branch offices and six special-purpose organizational units. The CNB is independent of government instructions. It has the exclusive right to issue banknotes and coins.

As of now the Czech banking sector consists of several groups of banks. The group of large banks includes the banks that operated prior to 1989. These are Komercni Banka, Ceska Sporitelna, Ceskoslovenska Obchodni Banka (CSOB), IPB and the Consolidated Bank, which differs essentially from the other four banks because it was established for the sole reason of administering of bad credits. Other groups include small banks, foreign banks, branches of foreign banks, which are not separate legal entities and specialized banks.

The creation of a new central bank is not the only structural change under the heading of capitalization. It is just the first step. The critical stages of economic transformation concern other sectors as well as the banking sector, but without them the changes in the banking system would not have been able to happen. Here these steps of transition parallel to the changes in the banking sector are briefly described. Establishment of basic conditions for business consists of the creation of basic legislative rules on joint-stock companies, individual businesses, state companies, the Act on Bankruptcy and Settlement, Act on economic competition, Commercial Code, Trade License Act, etc. Price liberalization occurs through deregulation of the prices, by letting them be determined by the forces of demand and supply instead of being preplanned. Foreign trade liberalization consists of elimination of the state monopoly over trade and reconstruction of the tariff rates. General installation of market relations happens through restoration of the dominant role of demand within the economy. Privatization represents a necessary basic change of ownership structure using various methods such as vouchers, restitution, and foreign investment. Re-structuring acts through opening opportunities for companies to perform structural changes in the sector, size, technology, and personnel according to their own decisions. Exchange rate adjustment led to the fact that in 1997 the exchange rate became floating. Establishment of capital market through the change in the ownership relations allowed the creation of the Prague Stock Exchange and other standard financial institutions. Comprehensive Tax Reform led to the standardization of the tax system in 1993, and contributed to the introduction of value added tax. External institutional economic and political changes are represented by the entry to the International Monetary Fund and World Bank, by the association and entry to GATT and WTO, Association Agreement to the EU, Central European Free Trade Agreement (CEFTA), entry to the OECD, entry process to NATO and gradual negotiation process and preparation for entry to the EU. The latter transitional reforms are going to be discussed in depth later.

One thing that is striking about these methods of capitalization is that they all are prescribed to every post-communist economy regardless of its specific features. Since they are characteristic of the Western type of economy they were assumed necessary for the newly emerging economies of Eastern Europe. Taken out of the economic models and put into practice some of these methods collapsed and revealed the utopia of the economic conformity. Most controversial appears the act of privatization: voucher privatization created a huge number of industry owners, few of who were interested, responsible, and capable of raising the revenues from the output of the industries that they owned; the restitution on the other hand produced industry owners who did not necessarily have any idea, experience, education or will to deal with the restituted object [at the same time taking it away from individuals who in the new situation were left homeless or jobless, or both]. Irrespective of these difficulties for implementing the desired changes it has to be admitted that there was no other alternative offered to the post-communist countries – they had to capitalize. This is the reason why all of them are following the same pattern of transition with slight variations – there simply is no other pattern.

"A country’s banking sector is not an isolated entity, and, in line with this, its prosperity is not immune from the weak spots in national economic development, thus the banking sector of the Czech Republic was not speared from difficulties in 1997". The main problem of the Czech banking sector is its bad credits and loans, which are burdening the banks and preventing them from making new loans to emerging industries. This inability to make loans suppresses investment and growth in the industries. In order to understand the roots of the problem in the Czech banking sector and economy as a whole one has to penetrate to the essence of the bad loans. A review of what bad loans are follows.

Bad loans are a significant contributing factor to the current Czech recession. The inability of firms to pay back their existing loans and the resulting losses in the banking industry have forced banks to be increasingly careful and hesitant when providing new loans; the low level of new loans then undermines all economic activity - particularly in an economy such as the Czech one where loans represent a relatively important source of funds for firms. The existing bad loans come basically from five broad groups of loans, which differ by their origin or motivation behind them. These are classified as "old loans", "privatization loans", "standard loans", "co-owner loans" and "tunneling loans". Old loans are the ones inherited from the previous regime, provided before the end of 1989. After 1989, economic reforms and opening to the world economy often led to abrupt changes in relative prices. As a result, many long-term contracts concluded in the past have turned unsustainable for one of the contract parties. These loans were made during the existence of the State Bank of Czechoslovakia. After its abolition the loans were transferred to the four commercial banks that evolved from the State Bank. Since the indebted enterprises were unable to pay back the loans, they were transferred again to a new bank – the Consolidated Bank, whose essential function was to take care of the loans. Over time most non-performing old loans have ended up in the Consolidated Bank’s portfolio in which they are referred to as the "Old Block". The privatization loans are a newer source of bad loans. Since the very beginning of the privatization process, the government has wanted to ensure that Czech subjects interested in buying state enterprises sold within the privatization process have access to enough money. That is why the government exerted a great deal of pressure on the several large state-dominated commercial banks so that they provide loans to these subjects and that they do so without "misplaced" circumspection. A natural consequence of this superficial approach to granting loans is that many of the privatization loans have turned out bad. Given that most of the debtors have gone bankrupt there is a small chance that these loans will ever be paid back. The standard loans are the ones provided by Czech Banks after 1989, which are not connected with privatization. Insufficient expertise and experience of bankers as well as bank-supervising bodies, few and weak restrictions on establishing a new bank, imperfect methods for improving the quality of the project which the loan was to finance and rapid and massive changes in the economic environment - all these factors inevitably led to many of the standard loans across the banking sector sooner or later turning out bad. The co-owner loans occurred as a result of the ownership structure brought about by the voucher privatization. Through the voucher privatization all of the large Czech banks indirectly acquired significant portions of shares of many Czech firms - and among them many of their own borrowers. Naturally, if any such borrower were to have at that time or later overall difficulties including difficulties with paying back (bad) loans to the bank that co-owns it, the bank would often prefer to provide another (bad) loan rather than initiating bankruptcy proceedings. Tunneling is a term that analysts of the Czech economy have come to use to describe the situation when a company’s managers/owners purposely run the company so that they themselves earn unreported income (apart from the official reported income they have as the company’s managers/owners) while the company usually suffers. Due to imperfect legislation, slow working of the courts, and other factors, tunneling has become a widespread phenomenon in the Czech economy and the banking sector is no exception. Thus, many so-called loans provided by the banks - primarily by the new small private ones - were not really meant as loans to be paid back, but rather as "gifts" to the borrowers. These borrowers were either the banks’ managers/shareholders themselves (often the same people), or their other firms. All in all, 23 small private banks have been established in the Czech Republic after 1989 (all of them before the end of 1993). While seven of these 23 banks have survived to these days and one was saved by foreign capital, the remaining 15 banks are either under forced administration or have even lost their banking licenses; and in at least 9 of these 15 banks, suspicious operations have been uncovered (such as big non-performing loans to shareholders). These are the factors underlying the recent recession in the Czech economy.

The article "Czech Banking Troubles Further Squeeze a Weak Economy" in the New York Times discusses the impact that these loans have on the Czech entrepreneurs through a particular case. "Jiri Hovorka is angry. At 26, he runs a moderately successful car-rental business. But he is unable to expand his fleet of 14 vehicles, a move that would allow him to increase his profit and hire more employees. No bank in the Czech Republic will give him a loan." There are many more like Hovorka who are discouraged from increasing their investment. The reason for the reluctance of the banks to give out loans is caused by the huge amount of bad loans. The Czech central bank estimates that non-performing loans, worth $9 billion, constitute 30 percent of all loans outstanding. Such estimation automatically constitutes an obstacle for the acceptance of Czech Republic as part of EU.

Besides having a large number of bad loans, the Czech banks are also behind in privatization that has aided the development of the banking systems in other Eastern European countries. The privatization plan in Czech Republic was not accommodating to foreign capital. Few companies were directly purchased by foreign investors, among them being Skoda now part of Volkswagen, which is the most successful and profitable company in the Czech Republic. The Czech privatization plan emphasized largely on domestic enterprises willing to buy the public industries. However, there aren’t many Czech entrepreneurs capable of purchasing large companies, and with the banks reluctant to give out loans many industries are left un-privatized.

The banking sector in particular needs an immediate privatization plan. There are four major state-owned banks that are to be privatized. The current Czech Government has declared its intention to privatize Ceska Sporitelna and Komercni Banka by mid-2000. The government has gone so far to realize that without foreign investment the economic problems of Czech Republic cannot be solved. The potential investors in the Czech Banks so far are Erste Bank of Austria for Ceska Sporitelna and Deutsche Bank for Komercni Banka. However, they are unwilling to take responsibility for the bad loans, and insist that the government should clear the bad loans itself. The Finance Minister of the Czech Republic asserted that Komercni Banka is the largest bank in Eastern Europe in terms of assets, and whoever buys it will have control over a quarter of the Czech economy. It might be dangerous to sell this power to a foreign investor, but this seems to be the best solution for the problems of the Czech economy.

A noteworthy fact is that the adviser for sale of Komercni Banka is Goldman Sachs and the one of Ceska Sporitelna is Merrill Lynch. Their recommendation towards the banks does not much differ from what was seen so far: clean up the bad loans!

The third major state-owned bank that is to be privatized is the Ceskoslovenska Obchodni Banka (CSOB). In October 1998 the International Finance Corporation met with top officials to renew IFC’s commitment to making its largest ever equity investment in banking, up to US$75 million in the state-owned CSOB on the condition that the bank privatizes as planned. IFC’s investment in CSOB is intended to support the bank through the process of restructuring and privatization. Together with Komercni and Ceska Sporitelna, CSOB is part of the fast-track privatization schedule of the Czech government. The Czech government’s bank privatization program is considered essential for economic growth in the Czech Republic and to support its aspirations to join the European Union. After privatization, CSOB forecasts more mobilization of savings and a better ability to serve its traditional function in the Czech corporate and foreign trade sectors as well as to expand into the retail sector. The transaction will bring new technology and skills to the Czech banking sector. Also it would stimulate the privatization of the remaining state-owned banks. Restructuring the financial sector is the government's highest priority and the privatization of CSOB is a key part of that process. The successful privatization of CSOB would send the international community an important signal of the Czech government’s commitment to economic reform, and become a model for other state-owned banks to follow. The International Finance Corporation, which is part of the World Bank Group, will not only finance investments in the banking sector but also will provide technical assistance and advice to the government and the bank itself.

The fourth major state-owned bank is Investicni a Postovni Banka (IPB). Major progress has been made to sell it to the Japanese Nomura Securities Co., Ltd. Thus, all four of the major state-owned Czech banks are going to be in the hands of foreign investors in the near future. How well are they going to serve the interests of the Czech people? For the least they will force the government to take care of the bad loans that are causing so much trouble.

An important part of capitalization is the development towards a change in the exchange rate mechanism and the creation of a new concept of the monetary policy of the Czech National Bank. The adverse development of the Czech economy led to the necessity to replace in May 1997 the mechanism of monetary fixing with the mechanism of floating exchange rate. The purpose of this step was to allow a more flexible response of the exchange rate to the economic performance, reduce the burden of government interventions, and limit the opportunity of raids by monetary speculators on the Czech crown (CZK). It was accompanied by marked fluctuation of the level of the central interest rates. The CZK significantly devaluated in respect to the dollar and the German mark, which was beneficial for the Czech trade balance, since exports being cheaper for the rest of the world, expanded.

European Union represents another thread for the independence of the Czech Government. As Czech Republic is keenly looking forward to its acceptance in the EU, it has to fulfill numerous requirements and has to subordinate its economy to the desires of the EU. For example the European Commission announced on April 25^th that it does not approve of the import-deposit requirements contained in the Czech government’s economic austerity package and it might try to force the government to withdraw them. The requirements – part of a package of budget cuts and wage freezes – ask importers to deposit 20% of the value of their imported goods into a Czech bank before the products can clear customs. The Czech officials will have to do something about it. As Karel Lukas, adviser on EU integration to the Minister of Industry and Trade Vladimir Dlouhy asserted, "We might be forced to make some changes".

The basic tasks related to the Czech Republic’s integration into the European Union with respect to banking are concentrated not only in the area of legislation but also in gradual adjustments of procedures and methods of bank supervision in regulation of the banking sector compatible with the general standards used in the EU countries.

The introduction of Economic and Monetary Union and transition to the Euro as its single currency will represent the elimination of the remaining barriers between the respective member states of the EU. Banking and financial conditions of not only all the participating countries but also of those outside will have to adopt the relevant new conditions. Even though the entry of the Czech Republic to the EU is not a question of the near future, for the optimal perspective development of the Czech economy, it is necessary to gradually incorporate its criteria to the decision-making activities and parameters of relevant domestic entities connected to this market. From this point of view the role of the banks that intermediate the contacts of the Czech economic entities on the EMU market is crucial. The banks of non-member states including the Czech banks have to ensure to their clients smooth mediation of all types of Euro payments, and all sorts of Euro transactions. This means that the existing group of currencies in which banks offer their standard services will expand.

"The authority responsible for monetary policy is the Czech National Bank (CNB), which was created on 1 January 1993, taking over from its federal predecessor. Its main objective was to ensure stability of the national currency. It was made independent from the government, but is accountable to Parliament. Its independence is guaranteed by the Act on the CNB and by the Czech Constitution. The CNB does not set targets for inflation, but has a target range for money supply growth. Although inflation has come down and the currency remained stable, the targets for money have generally been missed.

The two-tier banking system, in which the central bank is separated from commercial banking, was well established by 1993. Initially, the main instrument of monetary policy was quantity limits on the amounts banks could lend and borrow. The use of indirect instruments, such as open-market operations (treasury bills and bank bills) and regulation (e.g., setting minimum reserve requirements, discount and Lombard rates), to manage the money supply and the exchange rate became common only gradually after 1993.

The formal reform of the banking sector is essentially complete, but further restructuring is both necessary and expected. State participation accounted for 31.5% of banks’ capital by the end of 1995. Domestic banks accounted for 91.5% of deposits at the end of 1995; banks with state participation accounted for about 70% of total bank assets. Banks only fulfill their role of financial intermediation to a limited extent, and there are problems facing the sector at present. Firstly, there are too many small banks that are inefficient and therefore will not be able to survive as they are. During 1996, the rate at which banks ran into problems increased. Secondly, there is a significant amount of inter-ownership of banks and cross-ownership between investment funds and banks. Finally, the bad loans problem for banks, though it has improved, is still present. There are still wide spreads between interest rates on credits and on deposits. At present, therefore, the banking system cannot be considered sufficiently efficient or able to compete, but the system is stable: 80% of banking business is concentrated in the four main state-owned banks, and they currently are relatively healthy. As a result of the unease in the sector, the government is concentrating on privatizing each of the main four banks, one at a time.

The capital market, in particular the Prague stock exchange, has developed partly because of mass privatization. The basic legal and institutional frameworks have been set up. It is the largest stock exchange in the region, by number of stocks and capitalization, but trading has not increased rapidly, probably because the market lacks transparency. The stock exchange is not yet a significant way of raising finance for enterprises. The capital markets have been criticized by observers and investors for being poorly regulated and confusingly complicated. Illegal activity was discovered in some investment funds. In addition, there currently exist multiple markets for the trading of shares and securities, so that several prices can prevail for the same stocks. In response to these criticisms, considerable changes in the rules of the stock exchange, aimed at enhancing investor protection and market transparency, were introduced in July 1996. Also, the Ministry of Finance aims to set up an independent Securities Commission to improve supervision and regulation of the financial markets, as well as a clearinghouse to centralize the activity of the multiple markets. The governing body of the Stock Exchange has also proposed tackling the transparency problem by increasing reporting of financial results, and by limiting the number of markets on which stocks can be simultaneously quoted."

From this review can be summarized a concise list of reforms that should be performed in Czech Republic prior to its acceptance to the European Union.

1. The problem with the inefficiency of some of the small banks should be addressed and solved.
2. The inter-ownership of banks and cross-ownership between investment funds and banks should be eliminated. One of the reasons is that otherwise this allows the creation of loans, which in normal circumstances would not have been given, because they usually turn out bad.
3. The bad loans problem should be focused and settled.
4. Government privatization is commended.

Internationalization of the Czech banking sector concerns the influence that the International Monetary Fund has on the changes performed in the Czech banking system. In its concluding statement of October 18, 1999 the IMF made 15 points about the development of the Czech economy. Here I am going to discuss the three of these statements that concern the Czech banking sector in particular.

1. IMF finds signs that the economic recession of Czech Republic is fading away. Of help have been the easing monetary and fiscal policies i.e. low interest rates and low taxes, however, further reforms are necessary. IMF recommends immediate structural changes, without which the Czech Republic will be unable to reach sustainable growth, high income levels, and low unemployment rate. The IMF assessment announces weak corporate governance and a flawed legal framework for business activities as the root of the economic crisis.
2. IMF approves of the widening of the budget deficit, for according to the macroeconomic models it is going to spur growth. It also supports the lowering of the interest rates because this is going to stimulate investment. However, this stimulus for investment is going to be offset by the lack of access to new credits, low profitability in enterprises, and the absence of a well-functioning financial market. These constraints of the investors will be eliminated only after the privatization of the remaining state-controlled banks, and the improvement of the legal framework take place.
3. The third point that the IMF makes is that "The authorities can be commended for the considerable progress made in recent months in the restructuring and privatization of state-controlled banks. This process must now be completed very quickly. The current situation has paralyzed much of bank lending, as the largest banks refrain from committing new resources pending privatization. Bad loans do not get better over time, and early action is likely to yield maximum results. Actions to strengthen banks’ balance sheets prior to sale should be [made]… This also would improve the attractiveness of banks to investors and pave the way to ease the tight provisioning rules imposed by the CNB, thereby alleviating the continuing credit crunch. The role of the Consolidation Bank is critical in dealing with the bad assets. Its transformation from a bank into a workout institution and merger with Ceska Inkasni and Ceska Financni would not only allow it flexibility to maximize loan recovery but also increase transparency."

Look again at the reforms due to capitalization, compare it with the suggestions under europeanization, and contrast it to the recommendations under internationalization. Does something strike you? They are essentially the same. The three different aspects of globalization are fundamentally one ray of light with slight variations. Let’s revise the definition of globalization given in the beginning: Globalization is a process during which units are exposed to the exogenous influence of factors such as predominant theory (capitalism), local powers (EU), and international powers (IMF), which factors consequently make the initial units uniform or at least compatible with the existing global system. The new version states: Globalization is a process during which units are exposed to the exogenous influence of a single factor: universal conjecture, which factor consequently makes the initial units uniform or at least compatible with the existing global system. Thus, globalization is to be seen not only in the fact that the result of the influence of world factors is homogenous and uniform, but also in the fact that these world powers merge and start losing their identity and uniqueness becoming one universal factor. This type of Globalization I call Universalization. To make the distinction clear, I am going to give a particular example. A, B, and C influence X, Y, and Z. Globalization is when the impact of this influence makes X=Y=Z. Universalization is when the effect of this influence makes A=B=C. Globalization equalizes the consequences. Universalization standardizes the causes. This is a step further in integrating the world.

Universalization appears in the Czech banking sector. It has not evolved everywhere and it is not to be found in every aspect of life, as is globalization. It is an ever-newer phenomenon in its embryonic stage. The question that arises is "Do we need more vague terms to name undefined phenomena?" However, as when a baby is born it is given a name although it is not yet a developed individual, in the same way a new phenomenon must be named in order its expansion to be better observed.

Capitalization originates in the leading economical theories, predominantly Keynesian, sometimes Classical models. Europeanization is derived from the absorption of European values and standards by a number of countries with similar statuses. Internationalization comes from the application of economic formulae to economies all over the world often with very different economic and political circumstances. Thus, the three phenomena are different by their nature. In the case of their instructions towards the Czech Banking Sector, however, their opinions coincide. This is not random. This is the result of the fact that the modern version of capitalism, the European Union, and the International Monetary Fund have already been globalized. Globalizing the Banking Sector of Czech Republic is a second layer of globalization. Thus the following formula is derived: Globalization x Globalization = Universalization.

The Czech Banking Sector has a road of reforms waiting to be implemented. The government with a fast pace is progressing towards a solution of its main problems: the bad loans and insufficient privatization. As the Czech Banking Sector becomes increasingly capitalized it raises its chances of entering the EU in the near future. Once it becomes part of the EU, its voice on the international arena is going to be heard more and more often.

• Thomas Friedman, "The Lexus and the Olive Tree"
• "IMF concludes Article IV Consultation with the Czech Republic", www.imf.org
• "IMF concludes Article IV Consultation with the Czech Republic", www.imf.org
• "The Czech Republic and Economic Transition in Eastern Europe", Jan Svejnar
• General information on the Act on The Czech National Bank, www.cnb.cz
• "Czech Business and Trade" 5/1998 at www.mpo.cz
• Bad Loans: The Nightmare of the Czech Economy - February 26, 1999, www.ipb.cz
• Commission Opinion on Czech Republic's Application for Membership of the European Union (July 15, 1997), http://europa.eu.int/comm/enlargement/czech/
• IMF, Czech Republic – Staff Visit, Concluding Statement – October 18^th 1999, www.cnb.cz
• IMF, Czech Republic – Staff Visit, Concluding Statement – October 18^th 1999, www.cnb.cz