On 24 January the European
Bank Coordination Initiative (EBCI) – better known as the “Vienna Initiative” –
published the latest issue of its “CESEE Deleveraging Monitor”, a quarterly
report on the level of funds held by Western banks in Central, Eastern, and Southeastern
Europe, compiled on the basis of data reported to the Bank of International
Settlements (BIS). This latest report,
six pages in length, covers the funding situation in the third quarter of 2012.
According to the
report, 3Q 2012 was the fifth quarter in a row in which Western banks carried
out a net withdrawal of funds from their subsidiaries in the CEE area. The quarter was also marked by a shift of
funds from the rest of the CEE area to Russia Turkey
There was
considerable variation across the region.
While Hungary Slovenia Slovakia Montenegro
Source:
CESEE
Deleveraging Monitor (2013-01-24)
In other news, on
28 January a mission of the International Monetary Fund concluded its visit to Hungary Budapest
Financial
sector policy
9. The
banking system is facing great challenges as it seeks to redefine its role in
an uncertain environment. Banks are
generally liquid and most appear well capitalized but they continue to
experience losses resulting from high non-performing loans (NPLs) and related
provisioning, a heavy tax burden, and the mortgage pre-payment scheme. The
share of corporate and household NPLs increased significantly in 2012 to 21 and
15 percent, respectively, and is expected to rise further in 2013. Restructured
loans continue to grow and now make up a significant part of banks’ portfolios.
Portfolio cleaning remains sluggish reflecting a frozen real estate market and
banks’ unwillingness to realize losses, as well as legal and regulatory
obstacles to debt collection. Banks’ loan portfolio is contracting, unlike in
most regional countries, against a depressed economic environment and a sharp
reduction in external funding. Unless bank lending recovers, the economy will
struggle to grow.
10. A
turnaround of bank lending requires improving the banking system’s operational
environment. Key steps would include
increasing the predictability of government policies, scaling down the tax
burden, including the retroactive levies, and facilitating conditions to help
banks clean up their asset portfolio, including by removing tax, legal, and
regulatory obstacles. These would be a more effective, and less costly and
distortive, way to restore credit growth, as opposed to government initiatives
to stimulate credit through tax incentives for specific bank lending and direct
lending by state-controlled banks. The government’s intention to reach a new
agreement with banks is encouraging, but tangible steps would be needed to
address the underlying problems that undermine lending activity.
11.
Prudential norms could contribute to reducing still-large FX swap exposures. The stock of FX swaps of the banking sector has
declined by nearly one third since end-2011, in tandem with the reduction of
FX-denominated assets. However, it still poses liquidity and rollover risks and
banks should be encouraged to turn to more stable sources of external funding.
12. The
crisis management and resolution frameworks need to be upgraded in key areas. A clear framework, outlining the powers and
responsibilities of the resolution authority, the triggers, and the financing
arrangements, would improve the timeliness and cost-effectiveness of remedial
action, if and when, needed. The authorities are working in this direction and
legislation is being drafted.
Source:
Hungary–2013
Article IV Consultation and Third Post-Program Monitoring Concluding Statement
of the IMF Mission (2012-01-28)
Mark Pleas
[contact]
