Oct. 29 (Bloomberg) -- Erste Group Bank AG said there’s “no need and no desire” to remain committed to a pledge it and other banks made in 2008 to keep funding subsidiaries in eastern Europe.
Western banks made the promise when countries such as Hungary and Romania had larger current-account deficits than now and fewer options to finance them, Manfred Wimmer, chief financial officer of the region’s second-biggest lender, told analysts and investors yesterday at a meeting in London that was broadcast over the Internet.
The pledge, devised by the International Monetary Fund and the European Bank for Reconstruction and Development and labeled the “Vienna Initiative,” was key in averting economic collapse in eastern Europe in 2008 and 2009. Erste, UniCredit SpA and Raiffeisen Bank International AG were among signatories in countries including Hungary that received emergency IMF loans.
“The financing requirement has become much, much lower” because current-account deficits have shrunk or turned positive, Wimmer said, adding that funding sources like foreign direct investment or remittances are helping. “Everybody agrees that at this stage there is no need and no desire for a continuation of the Vienna Initiative.”
Chief Executive Officer Andreas Treichl reiterated that he aims to wean Erste’s Hungarian unit off parent funding to reduce vulnerability to potential measures by that nation’s government. “Our biggest risk is some kind of dramatic move in Hungary,” Treichl told the analysts. “We have to react and one of our clear goals is to increase the independence of our countries in terms of funding as much as we can,” Treichl added.
The initiative, under whose umbrella lenders, central banks and institutions including the IMF and EBRD continue to meet, still has a role to play in promoting local capital markets, Wimmer said.
--With assistance from Agnes Lovasz in London. Editors: Zoe Schneeweiss, Andrew Langley
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