VIENNA Jan 17 Governments, regulators and
international lenders have agreed to cooperate in trying to
avert a stampede out of emerging Europe by banks seeking to
slash their exposure to risk and ride out the euro debt crisis.
In a joint statement on Tuesday, national authorities,
European Union bodies and the international financial
institutions said they agreed to pursue a second "Vienna
Initiative", loosely modelled on a 2009 pact that prevented a
financial meltdown in eastern Europe after the decade's global
economic boom went bust.
"What I took away from this meeting was a remarkable
consensus," Erik Berglof, chief economist of the European Bank
for Reconstruction and Development, told a Euromoney conference
in Vienna. "Now it's to sit down and work out the details
together with the private sector."
The original Vienna Initiative helped west European banks
maintain their exposure to subsidiaries in emerging Europe at
the height of the global financial crisis, but the commitments
expired last April.
Banks have since come under new pressure to sell assets to
raise their core capital ratio, reduce their risk profile and
focus on home markets, while their ability to fund themselves on
capital markets has weakened.
"The euro zone crisis has led to renewed risks in the
financial sectors of emerging Europe since mid-2011," a joint
statement released by the European Commission and the European
Bank for Reconstruction and Development said.
"Market tensions notably in equity and funding markets have
resulted in significant deleveraging pressures in most
countries," they said.
Among the main banks concerned are Austria's Erste Group
Bank and Raiffeisen Bank International,
Italy's Unicredit and Belgium's KBC, all of
which face regulatory pressure to boost their capital buffers.
The aims of the new initiative, reached in Vienna on Monday
and dubbed "Vienna 2.0" in the statement, are more modest than
in 2009 - to slow the pace of deleveraging and avoid a funding
crisis in emerging Europe rather than to maintain investments
"In the absence of coordination, excessive and disorderly
deleveraging as well as a credit crunch may be the outcome," the
official statement said.
Raiffeisen CEO Herbert Stepic told the Euromoney conference
his bank was committed to staying in emerging Europe but said
the pace at which the European Banking Authority was demanding
banks increase their core capital was making that more
"It's one of the biggest nonsenses that has happened,"
"We see central and eastern Europe as a place that we will
continue to invest in. We won't run away because that continues
to stay the growth engine for Europe," he added.
The initiative brought together representatives of the
banks' home and host countries, plus the European Commission,
the European Banking Authority, the European Systemic Risk Board
as well as the International Monetary Fund, the EBRD, the
European Investment Bank and the World Bank.