mark allen - the vienna initiative_tcm75-24238
TRANSCRIPT
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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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The problem
Parent Banks severely affected by the crisis
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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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Vienna initiative structure
Vienna Initiative (VI)
(Launched Jan. 09)
Joint IFI InitiativeEuropean Bank Coordination
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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Vienna initiative structure
Vienna Initiative (VI)
(Launched Jan. 09)
Joint IFI InitiativeEuropean Bank Coordination
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
External positions of reporting banks
(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
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. Baltics
Ukraine Serbia
Romania Latvia
Hungary B&HVienna Initiative
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Vienna initiative structure
Vienna Initiative (VI)
(Launched Jan. 09)
Joint IFI InitiativeEuropean Bank Coordination
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!