Eastern Europes ailing banking systems need more
multilateral funding, bankers have warned ahead of their
meeting on Monday in Istanbul with the European Commission and
international financial institutions.
A year after the Wall Street meltdown, Ukraines banks
remain the most vulnerable. Hungary and the Baltic states,
especially Latvia, also cause concern.
Herbert Stepic, chief executive of Raiffeisen bank, one of
the western institutions most heavily exposed to the region,
told Emerging Markets: We need assistance from
multilateral lenders in these conditions capital
assistance and liquidity assistance.
Stepic said the IMF mandate needs to be prolonged in
Ukraine, and that the multilaterals had to press the
countrys regulators to improve conditions for foreign
banks working there.
He said there had been a slightly improving
trend across the region as a whole, and that more
short-term liquidity is available, but that serious problems
remained in some countries.
Luis Costa, emerging market debt strategist at Commerzbank,
said: Ukraine has been the main recipient of EBRD help so
far, and that will be the trend in 2010 and 2011.
Its still not finished, he added.
Only 50% of post-crisis write-downs have been done
The IMF, World Bank, EBRD and European Investment Bank met
in London last week with representatives of the European
Central Bank and 15 systemically important EU-based
parents of eastern European banks. Central banks and fiscal
authorities from western European nations and five eastern
European EU member states were also present.
The meeting reviewed the European Bank Coordination
(Vienna) initiative, an agreement reached last year
that the IFIs would support eastern European bank
restructuring, provided private banks recapitalised
subsidiaries and maintained their exposures.
A statement issued after that meeting acknowledged that
important challenges remain, including
ensuring financial system health. Mondays
meeting must address how the challenges are met.
After last weeks meeting, EBRD president Thomas Mirow
wrote to shareholders asking for an extra euro 10 billion, to
raise its capital by 50% and enable it to step up lending
much of which would go to the banking sector.
Ahead of Mondays meeting, Zsolt Darvas, researcher at
European think-tank Bruegel, told Emerging Markets
that while parent banks have largely remained committed to
eastern European subsidiaries, they will soon take the
decision to gradually reduce their exposure due to a
prolonged period of weak growth that will reduce
Reynold Leegerstee, banking analyst at Moodys, argued
that the Vienna initiative had helped to boost depositor
confidence. However, lower capital inflows to the region
and prolonged economic volatility will make it more difficult
for parent banks to price credit and liquidity
risk. This will serve to inhibit the business-operating