Driving off investor anxiety
“We do not run away”. Bankers and regulators at an investment conference in Vienna dispel fears of disorderly deleveraging.
As the weather has suddenly turned for the worst, so the climate has turned chilly for bankers, economists and regulators meeting at an investment conference in Vienna.
Bankers downplayed fears of widespread deleveraging in the region. Herbert Stepic, chief executive of Raiffeisen Bank International, one of the biggest lenders in the region, proclaimed at the event: “We do not run away, we will continue to invest.”
But a plan by Austrian regulators, published in January, to limit risks at the regional banks has provoked worries about a disorderly rush for the exit. The plan limits the growth of credit in the future, given the funding situation in the local markets.
Ewald Nowotny, governor of the National Bank of Austria and co-author of the new rule book, tried to dispel the concern of widespread deleveraging. The recent steps have been taken to “increase the sustainability of lending”, he told bankers at the conference. In addition, the new steps taken had no effect on already granted loans and “Austrian institutions have every intention to stay on board”, he said.
But Erik Berglöf, chief economist of the European Bank for Reconstruction and Development, often referred to as the Osteuropabank, appeared less confident.
The Austrian decisions have not been popular in Eastern Europe, and he sounded a note of caution. “Cross-border banking will not be the same after the crisis.”
He insisted that regulators and bankers should “keep their cool” in the current environment to limit any damage for the capital markets in CEE.
Officials and bankers alike asserted that Eastern Europe will continue to be the growth area of the continent. “The convergence story is in not over,” said Berglöf. Nowotny said that CEE stands to grow faster than the eurozone for years to come (see chart). “The convergence will go on, but at a slower pace,” he added.
Many government officials from the region focused their talks on the changing economic models they want to pursue.