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Big players lobby E.Europe, ECB on bank stability
December 18, 2008 / 6:41 PM / 9 years ago

Big players lobby E.Europe, ECB on bank stability

VIENNA, Dec 18 (Reuters) - The biggest foreign banks active in emerging Europe are trying to convince governments in the region to create their own stability packages rather than rely on the Western home countries of the dominant banks.

The banks are also trying to persuade regulators, the European Central Bank and Brussels to coordinate measures to counter the impact of the financial crisis on the region.

The banks met first in early November after initial talks at a World Bank meeting in October and agreed on issues in their common interest to safeguard financial stability in the region, one of the banks said.

Convincing emerging European governments to create their own stability packages is one of the main goals, a Raiffeisen International spokesman said.

“This is mainly about raising awareness, about starting a process to think about national measures in those countries to bring liquidity back in the markets,” said Michael Palzer.

“There was little initiative at the time coming out of the (emerging European) countries with the exception of Russia,” Palzer said. “It seemed as if the prevailing attitude was, ‘The home countries will solve that for us’.”

Doubts over Western banks’ commitment to emerging Europe loomed large when investors dumped Hungarian assets in October, and the Hungarian central bank called on them to publicly confirm their commitment to the country despite the crisis.

The market share of international banks ranges from a low of 65 percent in Poland to almost 100 percent in the Czech Republic, making the region’s businesses and consumers dependent on uninterrupted capital inflows from Western Europe.

Foreign market shares in the former Soviet Union are less significant because the main banks are still domestically owned.

Among the measures the bank group is lobbying for are reduced requirements to hold reserves at the central banks of the host countries. They also want to encourage the ECB to pledge liquidity support for those markets.

Palzer declined to say which banks were taking part in the discussions, but sources familiar with the group said they were the six biggest western banks active in the region.

They are: Italy’s UniCredit (CRDI.MI) and Banca Intesa (ISP.MI), Austria’s Raiffeisen International RIBH.VI and Erste Group Bank (ERST.VI), France’s Societe Generale (SOGN.PA) and Belgium’s KBC (KBC.BR).

Among them, UniCredit is biggest in Poland and Bulgaria, Erste is top in Romania, Slovakia and the Czech Republic, KBC in Hungary, Intesa in Serbia, and Raiffeisen in Russia and Ukraine.

Hungary’s OTP Bank OTPB.BU, the No. 5 lender in emerging Europe and biggest in its home country, is not part of the group, according to those sources.

Reporting by Boris Groendahl; editing by Elaine Hardcastle

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