VIENNA--There is a significant slowdown in deleveraging in
emerging Europe, thanks largely to the European Central Bank and an
improvement of bank regulation even cross borders, an European Bank
for Reconstruction and Development official said Tuesday.
Western European banks have been selling assets in non-core
markets to meet regulatory requirements designed to reduce debt and
increase capital reserves. Regions such as the central and Eastern
Europe have been particularly hit as a large percentage of the
banking sector is made up of foreign banks.
"Very clearly, the ECB has been a main driver in slowing down
and, hopefully, reversing the fragmentation of the banking sector,
with the improvement in the funding system of banks and a very
significant move toward a better institutional framework, which has
made a material contribution to the whole situation," Piroska Nagy,
EBRD director for country strategy and policy, told DJ FX Trader in
an interview on the sidelines of a financial conference in
Vienna.
The fact that deleveraging continues is still a source of
concern, she added. But a mechanism dubbed the Vienna 2.0
Initiative, established last year to curb negative factors and slow
down deleveraging, has helped "not to stop deleveraging but avoid
any sudden uncoordinated move that leads to systemic risk," Ms.
Nagy said.
Parent-bank conditions still play a role in bank funding in
emerging Europe as do low demand conditions, a study by the Bank
for International Settlements in December showed, she noted. But
bank sector fragmentation, which term is used to mean the
disintegration of an integrated market, is less that it used to be
as a result of the euro zone's debt crisis.
However, "we are not out of the woods yet in this regards," she
said.
Emerging Europe still has better growth prospects than the euro
zone so parent banks are committed to these markets, Ms. Nagy
noted.
Raiffeisen Bank International AG (RBI.VI), one of the Austrian
banks active in emerging Europe, expects growth rates in Central
and Eastern Europe, which has been hit hard by the euro zone's
problems, to remain higher than Western Europe and forecasts growth
of 2.1% in 2013 for the CEE region.
Debate now is centered around the banking union in the sector,
Ms. Nagy added.
The EBRD "will play a very constructive role in the ongoing
policy debate about the single supervisory mechanism," Ms. Nagy
said.
--Nicole Lundeen contributed to this article.
Write to Margit Feher at margit.feher@dowjones.com
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