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Theory suggests that cross-border bank lending flow from rich countries to poor countries is facilitated when lending-related legal and social norms are shared and valued equally by both lenders and borrowers. According to this reasoning the fast adoption of Western-style democracy and market economy principles as established by European Union (EU) standards by many of the East European 'Transformation countries' since the early 1990s should have raised cross-border lending by banks based in 'Old' EU member states to clients resident in new East European EU member states.
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