In a press
conference held by the National Bank of Serbia on 19 November to present quarterly
inflation statistics and macroeconomic analysis, the governor of the bank, Jorgovanka
Tabaković (Јоргованка Tабаковић), denied news reports that foreign (i.e.,
Western European) banks were pulling out of Serbia, saying that the the only
Western bank that is withdrawing from Serbia is the Hypo Group, which is
withdrawing from a wider part of Europe and not just from Serbia. (See earlier article in this column, Former
Yugoslavia – As part of re-privatization process, Hypo Alpe-Adria-Bank
publishes invitation for expressions of interest for purchase of its holdings
in Southeast Europe.) Ms. Tabaković
also denied reports that bank capital in general is being withdrawn from Serbia
Speaking on the
subject of the level of problem loans in Serbia
Related: Video of the full press conference (58:35 in
length, 470 MB) along with text of inflation-macroeconomics presentation and
Excel files giving inflation statistics: Извештај о инфлацији
(2012-11-19)
Background: The European
Bank Coordination Initiative (EBCI or “Vienna Initiative”) was established in
2009 as a “framework to safeguard the financial stability of emerging Europe ”, and has the
support of the European Commission, the European Investment Bank, the EBRD, the
IMF, and the World Bank. The Initiative
is led by the Chairman of its Steering Committee, National Bank of Poland
The financial crisis has brought conflicts of interest between the
banking sector’s home and host countries sharply into focus. Countries where
foreign banks’ subsidiaries or branches are systemic face particular challenges
in safeguarding financial stability and ensuring adequate credit supply for
their economies. The countries of Central, Eastern and Southeastern Europe (CESEE)
are important hosts to foreign banks headquartered predominantly in Western Europe . The ongoing
eurozone crisis has highlighted the risk of disorderly deleveraging of western
parent banks vis-à-vis their affiliates in CESEE and difficulties in
cooperation between home and host country authorities.
Against this background, it is the objective of the Vienna Initiative 2
to help:
• Avoid disorderly deleveraging, which could
jeopardize financial stability in host countries and ultimately hurt home and
host country economies alike. The objective is not to prevent deleveraging in
general. Some deleveraging is beneficial, leading to more stable funding
structures, reduced external debt, or stronger bank owners. It is large-scale, unanticipated
rapid deleveraging that creates systemic risks and unduly curtails overall
funding of CESEE banks that one needs to guard against;
• Ensure that potential cross-border financial
stability issues are resolved. The multi-jurisdictional setting is prone to
gaps, overlaps, competing objectives and conflicts of interest among
authorities, all of which demands attention. In addition banking groups would benefit
from progress in this area as it would strengthen the conditions for stable and
well-functioning cross-border banking;
• Achieve policy actions, notably in the
supervisory area, that are taken in the best joint interest of home and host
countries. This requires mutual recognition of concerns by home and host
countries, ensuring that host authorities have an appropriate voice, and
fostering an atmosphere of trust amongst all relevant parties. The issues of
bank resolution also call for the participation in discussions and potential
involvement of authorities beyond supervisors and central banks, notably the
fiscal authorities responsible for taxpayers´ money.
The Vienna Initiative 2 builds on the success of the Vienna Initiative 1,
which was established at the height of the global financial crisis of 2008/09. It
again uses a private-public sector platform, which brings together key
International Financial Institutions, the European Commission and relevant EU
institutions, the principal cross-border banking groups, and home and host
country authorities, complementing other initiatives. Its geographical coverage
extends beyond the European Union (EU) and also includes other CESEE counties
with a substantial presence of western banks—instances where cross-border
arrangements are naturally much less developed than inside the EU. While the
Vienna Initiative 1 was focused on western banking groups maintaining exposure
to their CESEE affiliates and providing capital and liquidity as needed, the
Vienna Initiative 2 is, in addition to the private sector participation, mainly
geared towards authorities, encouraging them to cooperate. Nonetheless the
private sector has an important role to play, both in terms of helping identify
concrete steps to improve coordination of authorities and in terms of working
itself to avoid disorderly deleveraging.
The work within the Vienna Initiative 2 aims for practical results by
monitoring of, and reporting on, the deleveraging process and by setting up
temporary structures where private and public sector decision makers meet to
exchange experience and discuss appropriate actions. Within such structures, peer
pressure may be used to help resolve common problems. Drawing practical
conclusions from the experience of the host countries and proposing action on
those conclusions is also within the remit of the Vienna Initiative 2. Finally,
discussions of macro-prudential issues should also be a part of the work. New
regulatory development, such as the Commission resolution proposal and the
banking union will be observed.
Source: Vienna Initiative website
Mark Pleas
[contact]
