(For other news from the Reuters Central European Investment
Summit, click on
http://www.reuters.com/summit/CentralEuropeanInvestment10)
* Bank consolidation, NPLs limit c. Europe credit growth
* Greek debt crisis impact to linger in southeastern Europe
* Hungary bank tax "excessive", possibly "counterproductive"
LONDON/VIENNA, Oct 13 (Reuters) - Rising bad loans and
fragile economic recovery will keep credit growth flat in much
of central Europe with the southeast affected for years to come
as a result of Greece's debt crisis, the EBRD's senior economic
aide said on Wednesday.
Piroska Nagy, senior advisor to the chief economist at the
European Bank for Reconstruction and Development, also said
Hungary's financial sector tax was "excessive" and could prove
counterproductive to the country's economic recovery.
"There is one cross-cutting theme in the region and that is
the high level of non-performing loans and the weakness of bank
balance sheets," said Nagy, who is responsible for financial
sector stability and regulatory issues at the London-based
development bank.
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Graphic on emerging Europe: http://r.reuters.com/kyk47p
For a factbox on investment flows, click []
For a factbox on main risks in central Europe: []
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Two years since the onset of the global financial crisis,
economies in the region have largely stabilised but Western
lenders active in central Europe remain preoccupied with
repairing their balance sheets instead of accelerating loan
growth, she said.
"The priority is to support the clean-up of balance sheets,
it's a bank job and should be market-driven," Nagy told the
Reuters Central European Summit via videolink in London.
"There will be some further
consolidation. Several big bank groups are undergoing
restructuring. They are selecting core markets and they might
divest from non-core markets," she said.
This scale-back is part of a "managed deleveraging" overseen
by the "Vienna Initiative", a framework set up at the height of
the crisis to coordinate efforts between multilateral bodies
such as the International Monetary Fund and Western lenders to
help stabilise the regional financial sector.
"Bank groups will identify non-core markets to withdraw,
that should be welcome ... It will be a market-based solution
using this coordination mechanism," she said, noting that there
had been no tendency in the region to nationalise the banks.
CRISIS RESPONSE
Nagy said the EBRD would still focus on providing financing
to support the financial sector in emerging Europe with
particular attention on southeastern European economies such as
Romania and Serbia where Greek banks are active.
Earlier this month, the bank signed credit lines worth 630
million euros for Greek bank subsidiaries in Albania, Bulgaria,
Serbia and Romania.
The EBRD credit lines are part of the financing that the
EBRD, the World Bank and the European Investment Bank have set
aside to invest in the region over 2009-2010.
An originally planned 24.5 billion euros has already been
exceeded, with 27 billion euros made available by the end of
August.
"This is still very much a region which needs the support
and we are happy to provide it when necessary," she said.
Nagy said regional exceptions were Poland and Turkey, which
risk market overheating as a result of strong capital inflows,
while Hungary stood out at the opposite end of the spectrum with
its high level of bad debt.
She said Hungary's move to impose a 200 billion forint ($1
billion) windfall tax on the financial sector this year and next
to plug budgetary holes was "excessive."
"(The tax) is based on exposures, not profits. In some
cases, this eats into capital, that's very counter-productive,
you want to prop up capital these days," she said.
On Wednesday, Hungarian authorities dismissed an unsourced
local press report that three foreign banks were considering a
withdrawal from the country as a result of the windfall tax.
[]
"My understanding is that the Hungarian authorities are
looking at this issue and that the tax base for next year is not
decided, obviously there is some room for manoeuvre," she said.
(Reporting by Sebastian Tong in Vienna and Carolyn Cohn in
London; editing by Susan Fenton)
