Financial authorities in eastern Europe risk triggering a
new wave of crisis if they fail to develop a counter-cyclical
response, in particular by relaxing capital requirements,
senior bankers from the region warned yesterday.
We have not yet reached the point where the banks are
safe: they are still struggling with the lack of
liquidity, Gyorgy Suranyi, head of central and eastern
Europe at Banca Intesa of Italy, warned a seminar at the EBRD
Business Forum in London.
The crisis in the region only started with the onset of the
credit squeeze late last year, he pointed out, meaning that its
banking systems have been hit by the monetary shock and the
collapse of export markets at the same time.
Suranyi, a former governor of the Bank of Hungary, said that
western Europe had adopted counter-cyclical fiscal and monetary
policies, but that eastern Europe, with the possible
exception of the Czech republic, had responded
pro-cyclically which is about to create an even deeper
He added: I dont believe high growth rates will
return in the region. If they did, a higher capital requirement
should be imposed. But to impose it now risks compelling banks
to tighten risk management and pushing the economies further
down the drain.
Suranyi said he didnt see a solution
without the involvement of a lender of last resort an
implicit criticism of the ECBs reluctance to play a
greater role in the region.
Suranyi told Emerging Markets: It would have
been much better [for eastern European authorities] to have a
counter-cyclical policy on capital requirements and
provisioning. If capital requirements were increased
during the downturn, this could negatively impact lending
policy and risk management and curb lending at the point
when the real economy needs it most.
Grigori Marchenko, Governor of the National Bank of
Kazakhstan, also advocated a counter-cyclical approach.
Trying to be tough in difficult times, having been lax in
good times, is not a good model.
Herbert Stepic, chief executive of Raiffeisen International,
in response to a question about prospects of recovery, told the
seminar: We are still only at the beginning of the crisis
of the real economy. He said the crisis was an excellent
opportunity for regulators in the region to stop foreign
exchange lending to private individuals. Discussions with
regulators on such measures are far advanced, he
Oleg Vyugin, chairman of MDM Bank, which is in the process
of completing a merger with Ursa Bank to create Russias
largest privately-owned bank, said that the crisis was
the best time for banking consolidation.