Foreign Banks and the Vienna Initiative: Turning Sinners Into Saints?

IMF Working Papers, May 1, 2012

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Canonical URL: Foreign Banks and the Vienna Initiative: Turning Sinners Into Saints?

Authors: Ralph De Haas, Yevgeniya Korniyenko, Alexander Pivovarsky, Elena Loukoianova
Published: May 1, 2012
Series: IMF Working Papers
DOI: https://doi.org/10.5089/9781475503463.001

Study uses data on 1,294 banks in Central and Eastern Europe to analyze how bank ownership and creditor coordination in the form of the Vienna Initiative affected credit growth during the 2008–09 crisis.
As part of the Vienna Initiative, western European banks signed country-specific commitment letters in which they pledged to maintain exposures and to support their subsidiaries in Central and Eastern Europe.
Both domestic and foreign banks sharply curtailed credit during the crisis, but foreign banks that participated in the Vienna Initiative were relatively stable lenders.
No evidence was found of negative spillovers from countries where banks signed commitment letters to countries where they did not.

Both domestic and foreign banks sharply curtailed credit during the 2008–09 crisis.
Foreign banks that participated in the Vienna Initiative exhibited relative stability in lending compared with other banks.
No detected negative spillovers from countries with Vienna Initiative commitment letters to countries without such letters.

Subject areas: Bank credit, Banking, Credit, Financial crises, Financial institutions, Foreign banks, Loans, Money.
Keywords: Bank credit, bank lending, bank subsidiary, Central and Eastern Europe, Credit, credit growth, Europe, Financial Crisis, Foreign Banks, government support, loan-to-deposit ratio, Loans, parent bank, roll-over commitment, State Support, VI bank, Vienna Initiative, WP.

Creditor coordination mechanisms such as country-specific commitment letters under the Vienna Initiative can be associated with greater lending stability by participating foreign banks during systemic crises.
Presence of such coordinated commitments did not produce measurable adverse spillovers to non-participating countries in this sample and period.

IMF Working Paper — Foreign Banks and the Vienna Initiative: Turning Sinners Into Saints? (Working Paper No. 2012/117), May 1, 2012.

_wp12117 — Foreign Banks and the Vienna Initiative: Turning Sinners into Saints?
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