May 14, 2014 / 1:21 PM / in 4 years

East Europe impact of euro zone bank review not as bad as feared:EBRD

WARSAW, May 14 (Reuters) - There is no sign that the European Central Bank’s in-depth health check of top euro zone banks has caused the exodus from central and eastern Europe that some in the region had feared, the EBRD said on Wednesday.

The European Central Bank is conducting detailed checks of the euro zone’s largest lenders, combing through their loan books to uncover hidden losses in order to start with a clean slate when it takes over as bank supervisor in November.

Some policymakers feared big banks would retrench from central and eastern Europe to bolster their risk profiles, but European Bank for Reconstruction and Development (EBRD) chief economist Erik Berglof said the signs were so far reassuring.

“We had been very worried about the impact of the (ECB) Asset Quality Review but ... (because of) the measures that have been taken, the signals about the banking union, the increased co-ordination between home and host authorities, that impact has not been as strong as feared,” Berglof said.

“But again there is still more deleveraging to come and this has to be watched very, very closely,” said Berglof, speaking in Warsaw at the EBRD’s annual two-day meeting.

Euro zone banks with a major presence in eastern Europe and the Balkans include Austria’s Raiffeisen and Erste , Italy’s Unicredit and France’s Societe Generale. (Reporting by Marc Jones; Editing by Gareth Jones)

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