Mark Allen - The Vienna Initiative_tcm75-24238

8/13/2019 Mark Allen - The Vienna Initiative_tcm75-24238

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The Vienna Initiative

KNF Conference on Household Lending

Warsaw, October 20, 2010

Mark Allen

Senior IMF Resident Representative for Central

and Eastern Europe


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2

The problem

Parent Banks severely affected by the crisis


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3

0

2

4

6

8

10

12

14

-

200

400

600

800

1,000

United States Euro Area UnitedKingdom

Other MatureEurope

Asia

Realized writedowns/loss provisions (2007q2 - 2009q4)

Expected additional writedowns/loss provisions (2010q1 - 2010q4)

Tier1/RWA capital ratio end-2009 (right scale)

European banks badly affected

(billions of US$)percent

Source: IMF, Global Financial Markets (April 2010)


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The problem

Parent Banks severely affected by the crisis

CEE worst hit region in crisis Risk of capital outflows worsening outlook


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Deleveraging expected to follow

previous crises

Source: BIS; IMF, International Financial Statistics

0

10

2030

40

50

6070

80

90

100

t-20 t-15 t-10 t-5 t t+5 t+10 t+15 t+20 t+25 t+30

Asia(Sep 1997)

Emerging Europe(Jun 2008)

Latin America(Dec 1983)

Foreign Banks Exposure in relation to GDP

(peak = 100)


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Credit growth is related to cross-border flows

Cross-border bank deleveraging

Hungary

Russia

Ukraine

EstoniaLithuania

Czech

Romania

Latvia

Poland

Croatia

Bulgaria

Turkey

-12

-8

-4

0

4

8

-10 -5 0 5 10

BISC

ross-BorderBan

kFlows,

2009Q3t

o2010Q1(percentofGDP)

Real Growth in Credit to the Private Sector, 2009Q3 to 2010Q1 (percent)

Central and Eastern Europe

Emerging markets and other countries


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Bank flows threatened balance of payments

Source: BIS

External positions of reporting banks

(USD billions, estimated exchange rate adjusted changes)

Excludes: Russia, Turkey-30

-20-10

0

10

20

30

40

50

Other PolandCzech Rep. BalticsUkraine SerbiaRomania Latvia

Hungary B&H

Vienna Initiative


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Vienna initiative structure

Vienna Initiative (VI)

(Launched Jan. 09)

Joint IFI InitiativeEuropean Bank Coordination

Initiative (EBCI)


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Participants in Vienna Initiative

MDBs (World Bank, EBRD, EIB) andIMF

European Union and ECB

Program countries (Bosnia andHerzegovina, Hungary, Latvia, Romania,Serbia (Central Banks and supervisors)

Home country supervisors (Austria, Italy,France, Germany, Belgium, Greece)

Foreign banks active in country


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(Launched Jan. 09)


Initiative (EBCI)

EBRD, World Bank, EIB

Financial Assistance tostrengthen banks in the

region


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Commitments and Delivery under

Joint IFI Action Plan

Commitments

2009-2010

Available as of

end-August 2010

Of which: signed

as of end-August

2010

EBRD 6.0 6.8 4.9

EIB 11.0 13.1 10.2

World BankGroup 7.5 7.2 6.4

TOTAL 24.5 27.1 21.5

Source: EBRD


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(Launched Jan. 09)


Initiative (EBCI)

EBRD, World Bank, EIB Country Meetings

RomaniaSerbia

Hungary

Bosnia & HerzegovinaLatvia

(Ukraine)

Private SectorInvolvement

(PSI)

Full Forum Meetings

Policy DiscussionsFinancial Assistance tostrengthen banks in the

region


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Country Meetings

Informal and voluntary

In support of IMF arrangements

Exposure commitments (PSI) Capitalization commitments based on stress tests

Meetings to agree on adjustments to

commitments


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Experience with PSI commitment

Target Adjustment Actual(end 2010)

Bosnia andHerzegovina

Maintain at end2008

- 98.5%

Hungary Maintain overallexposureMaintain at 95% 114%

LatviaMaintain overallexposure

- 87% of end2008 level

Romania Maintain at end -March 2009Maintain at 95% 99.5%

SerbiaMaintain at end2008

Maintain at 80%effective April 2010

98%

h b


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Exposure agreements have been

generally effective

Source: BIS


(estimated exchange rate adjusted changes as percent of December 2008 volume)

-40

-30-20

-10

0

1020

30

40

50

-20

-15-10

-5

0

510

15

20

25Bosnia and HerzegovinaHungaryLatviaRomaniaSerbia (rhs)


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Post-crisis deleveraging has been modest

Source: BIS; IMF, International Financial Statistics

0

10

2030

40

50

6070

80

90

100

t-20 t-15 t-10 t-5 t t+5 t+10 t+15 t+20 t+25 t+30

Asia(Sep 1997)

Emerging Europe(Jun 2008)

Latin America(Dec 1983)

Foreign Banks Exposure in relation to GDP

(peak = 100)

B k fl h bili d f VI


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Bank outflows have stabilized for VI

and other countries in the region

Source: BIS


(USD billions, estimated exchange rate adjusted changes)

Excludes: Russia, Turkey-30

-20-10

0

10

20

30

40

50 Other PolandCzech Rep. Baltics

Ukraine Serbia

Romania Latvia

Hungary B&HVienna Initiative


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(Launched Jan. 09)


Initiative (EBCI)

EBRD, World Bank, EIB Country Meetings

RomaniaSerbia

Hungary

Bosnia & HerzegovinaLatvia(Ukraine)

Private SectorInvolvement

(PSI)

Full Forum Meetings

Policy Discussions

Working Group Working Group

Local currencycapital markets

Absorption ofEU structural

funds

Financial Assistance tostrengthen banks in the

region

W ki G d l f


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Working Group on development of

local currency capital markets

Foreign exchange loans created serious vulnerabilities Current account deficits financed by banking flows

in foreign exchange

Change strategy to rely on domestic savings

Discourage foreign exchange lending and promote

local currency sourcing

Working Group with participation of banks,supervisors, and Hungary, Romania, and Serbia to

report in November


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Challenges ahead

Uncertainties about parents strength

Impact of financial sector taxation

Duration of adjustment and externalsupport

Developing Vienna Initiative as forumfor policy discussions


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Thank you!

Documents

Mark Allen - The Vienna Initiative_tcm75-24238