Vienna Initiative, 10 Years On, Makes Case for Deeper Financial Integration in Emerging Europe
IMF News, March 28, 2019
Source details
- Canonical URL
- Vienna Initiative, 10 Years On, Makes Case for Deeper Financial Integration in Emerging Europe
Other formats
Bibliographic details
- Published: March 28, 2019
Overview
- Press Release No. 19/98, March 28, 2019, IMF Communications Department.
- The Vienna Initiative marked a decade since its launch as a public-private forum that helped emerging Europe weather the worst of the global economic crisis.
- Founding members and partners convened in Vienna on 27 and 28 March to reflect on achievements of the multinational coordination model that preserved financial stability in the region.
- Ewald Nowotny (Governor of the Austrian National Bank) said: “This event is not only an opportunity to celebrate. It is also an incentive to keep up with the good work. The Vienna Initiative will continue to preserve financial stability by providing substantial input to international discussions, propel financial integration and enhance growth in countries of central, eastern and south eastern Europe.”
- An agreement in 2009 between policy makers and the banking industry ensured foreign banks continued to maintain exposure and fund their subsidiaries in central, eastern and south eastern Europe (CESEE), helping avert banking crises during a sharp downturn.
Cross-border banking and growth impacts
- The Vienna Initiative brings together: IMF, EBRD, EIB, the World Bank Group, European Commission, ECB (as observer), home and host country central banks, regulatory and fiscal authorities, and the largest EU banking groups active in emerging Europe.
- The anniversary meeting called for deeper financial integration as a means to a new, more balanced growth model with stronger focus on:
- financing innovation,
- supporting SMEs,
- measures to act on climate change.
- Evidence from CESEE shows that cross-border banking benefits economic growth: “The direct positive effect of financial integration on growth outweighs the indirect negative effect of higher risk of contagion.”
- Remaining and persistent risks identified:
- global trade tensions,
- continued geopolitical instability,
- high corporate debt levels.
- Boris Vujčić (Governor of the Croatian National Bank and Chair of the Vienna Initiative) said: “The Vienna Initiative undoubtedly helped to prevent a disorderly deleveraging in CESEE at the peak of the global financial crisis. Ever since, it has promoted well-functioning and stability of cross-border banking by providing seminal setting for all stakeholders, home and host authorities, banks, European institutions and IFIs. Going forward, the Vienna Initiative will continue to serve as a platform open for ideas and policy actions that will be taken in the best interest of all the stakeholders.”
Full Forum — findings from work streams
- CESEE Bank Lending Survey:
- sees an improving landscape with “slightly upbeat expectations” prevailing,
- country differences remain significant,
- increased regional profitability reflects appeal of the CESEE strategy for international banking groups.
- Credit quality:
- continues to improve in the region,
- since the launch of the NPL Initiative, bad debt volumes in CESEE have gradually decreased,
- the fall in NPLs was particularly strong in Albania, Croatia, Hungary, Montenegro and Serbia.
- IFI financial products supporting investment:
- final report found IFIs have played an important role in supporting access to finance for the private sector,
- IFIs could play a catalytic role in the transition toward a new growth model,
- better and more accessible data on IFI activity and product supply could help reach clients and stakeholders.
- MREL (minimum requirement for own funds and eligible liabilities):
- compliance with MREL targets may pose challenges for banks operating in the region in the coming years,
- the Vienna Initiative offers a framework to reflect on potential solutions that bring together interests of home and host countries.
- AML/CFT and sustainable finance:
- the Full Forum addressed the impact of Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) on banking in CESEE,
- the World Bank and the IMF presented the evolution of regulatory and supervisory approaches and the importance of effectiveness,
- availability of sustainable finance in the region was a special focus, including discussion of conclusions from the Central Banks’ Network for Greening Financial Systems.
Policy implications and next steps
- Continue coordination between policymakers and bankers to address remaining and future challenges, including:
- resolution of bad debt,
- regulatory reform,
- deepening financial integration,
- availability of funding for innovation,
- mobilizing private sector contribution to climate and energy goals.
- Use the Vienna Initiative as a platform to:
- provide substantial input to international discussions,
- propel financial integration,
- enhance growth in countries of central, eastern and south eastern Europe.
Press Release No. 19/98 — March 28, 2019 — IMF Communications Department