Bank deleveraging in CEE picking up pace in the second quarter

By bne IntelliNews November 13, 2012

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Bank deleveraging in the CEE region picked up the pace once more in the second quarter of 2012, a new survey reveals, although the rate of funding withdrawals remains subdued compared with the second half of last year.

Figures from the Vienna Initiative, which aims to prevent a disorderly deleveraging from the region that would imperil their banking systems and economies, showed deleveraging by Western European banks from their CEE units picking up in the second quarter. Bank withdrawals were equivalent to 0.8% of the region's GDP in the quarter, compared with 0.3% in the first three months of the year.

At the same time, the pace of deleveraging remained "moderate" at around half the level seen in the second half of 2011, the Vienna Initiative said in a statement. Cumulative funding withdrawal from the region stands at 4% of GDP since mid-2011.

In six countries, western banks have reduced exposure by more than 5% of GDP, the group said. Funding in Hungary and Slovenia fell by 10-15% of GDP, while Bulgaria, Croatia, Lithuania, and Serbia have seen funding pullbacks of 5-10%, the report reveals.

Non-performing loans are also a concern, the group added, adding extra restraints on economic recovery in the region. "The high level of impaired assets in some countries of emerging Europe constitutes an obstacle to new lending and ultimately to the return to growth," the group says.

The Vienna Initiative is a group of banks, regulators and policy makers helped prevent a CEE financial collapse in 2008 and 2009 by persuading western banks to stay invested in the region and roll over financing when needed.

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