This article analyzes the political processes that have shaped legal reform of the banking sector in the post-communist region. The article identifies two patterns of reform and examines hungary and bulgaria as examples of each pattern. The strategy for changing banking sector legislation and its implementation in hungary has been ‘reforming for the market,’ whereas the prevailing strategy in bulgaria until 1997 was ‘reforming for our friends.’ after 1997, bulgarian governments switched to ‘reforming for the market.’ i argue that this shift took place because of an important partisan change of the governing elites that reinforced the role of international actors and altered the elites’ relationship with important domestic stakeholders. The article shows that front-runners of banking reform in the region such as hungary introduced significant private ownership in the sector and, at the same time, the governing elites enhanced the state's regulatory capacity. By contrast, ‘partial reform’ regimes such as bulgaria until 1997 undertook limited and selective ownership change and the governing elites weakened the state's regulatory capacity, thus giving a boost to the already existing clientelism.