Session III Financial Markets Discussion

Transcription

1 Six Years After EU Enlargement Austria and Its Eastern Neighbors Session III Financial Markets Discussion Claire Waysand, Assistant Director European Department International Monetary Fund *copyright rests with the author 3/17/2010 1

2 The size of the Austrian banking sector compared to its GDP is close to the euro area average Austria is both home as well as host supervisor. IRL FRA NLD Banking sector assets in percent of GDP, at end-2009 AUT Euro area DEU Sources: ECB's MFI statistics, nominal GDP from IMF staff. 3/17/2010 2

3 But Austria s Exposure to CESE is significant with around 70 percent of GDP Austria: Exposure to CESE (Billion Euro) Jun.2008 Sep.2008 Dec.2008 Mar.2009 Jun.2009 Sep.2009 All CESE Czech Republic Romania 1/ Hungary 1/ Slovakia Croatia Poland Russia Slovenia Ukraine Serbia 1/ Bulgaria Bosnia and Herzegovina 1/ Belarus Turkey Latvia 1/ Moldova Lithuania Macedonia, FYR Estonia Montenegro Albania Source: BIS, Table 9B. 1/ Part of the European Bank Coordination Initiative ("Vienna Initiative"). 3/17/2010 3

4 especially when compared to other countries Foreign claims on CESE in % of 2009 GDP, Sept. 09 Austria Belgium Sweden Netherlands Italy Germany France /17/2010 Source: BIS, Table 9B. 4

5 Austria has therefore been hit by the bust of the credit cycle in CESE Emerging Europe: Nonperforming Loan Ratios (Percent) Latest Bosnia and Bulgaria Croatia Czech Republic Estonia Hungary Latvia Lithuania Poland Romania Russia Serbia Turkey Ukraine Source: National authorities and Vacher (2009). 3/17/2010 Note: Due to differences in national accounting, taxation, and supervisory regimes, as well as changes in definition, 5 nonperforming loans are not strictly comparable across countries or with historical data. 0

6 The macroeconomic stabilization of the region, together with the EBCI ( Vienna Initiative ) played an important role Joint EU/IMF programs European Banking Coordination Initiative (EBCI) helped stabilize the situation and create a dialogue between different stakeholders Austrian banks broadly maintained exposure 3/17/2010 6

7 Developments differ between countries Foreign claims by Austrian banks (billion euros) June-08 Sept Czech Rep. Romania Hungary Slovakia Croatia Poland Russia Slovenia Ukraine Serbia Bulgaria B & H 3/17/2010 Source: BIS, Table 9B. 7

8 600 Austria: Sovereign and Banks' CDS (basis points) Austria Raiffeisen Erste Bank Stand-by arrangement for Ukraine and Hungary EBCI coordination meeting on Serbia Stand-by arrangement for Romania EBCI Meetings on Romania and Hungary EBCI Meeting on B & H Stand-by arrangement for B & H Stand-by arrangement for Serbia 0 5/29/08 6/26/08 7/24/08 8/21/08 9/18/08 10/16/08 11/13/08 12/11/08 1/8/09 2/5/09 3/5/09 4/2/09 4/30/09 5/28/09 6/25/09 7/23/09 8/20/09 9/17/09 10/15/09 11/12/09 12/10/09 1/7/10 2/4/10 3/4/10 Sources: Thomson Financial/DataStream and Bloomberg. 3/17/2010 8

9 Lessons Importance of spillovers between Austria and its neighbors. Need of cooperation in crisis prevention. More integrated supervisory framework. Cooperation to reduce risks including fx lending. Macroprudential surveillance at relevant level ESRB. Need of coordinated answers to the crises. Further steps? 3/17/2010 9

10 Appendix 3/17/

11 FX lending constitutes a specific risk factor Supply side: Loan euroization highest for countries that saw large capital inflows and rapid credit growth countries that reached very high loan to GDP ratios Demand side: lower fx interest rates and stable or appreciating exchange rates favor fx lending Half of Austrian lending to CESE was in fx (euros, CHF) Supranational approaches to address fx lending Improve transparency for consumers and introduce specific capital requirements to discourage fx lending Support and develop domestic currency funding markets through macro policies and regulation Importance of stable macroeconomic policies 3/17/

12 Fx lending remains an issue Local currency use should be encouraged Debt management and other policies need to create demand for long-term local currency Sound macro policies are a necessary condition for domestic currency market Re-emergence of credit booms fueled by capital inflows needs to be prevented 3/17/

13 FX loans and exposure to Western Banks Foreign banks exposure and foreign currency loans Capital inflows play a key role: The higher the exposure of Western banks, the more domestic foreign currency loans Foreign currency loans (percetn of GDP) Ukraine Serbia Poland Romania Bulgaria Lithuania Hungary Latvia y = x R 2 = Estonia 10 Czech Republic Exposure of Western Banks (percent of GDP) 3/17/

14 Raiffeisen International: CESE Loans (Eur 78 bn, Sept. 09) Russia (16%) Hungary (12%) 4% 10% 16% Slovakia (12%) Czech Rep. (10%) 5% Romania (8%) Croatia (8%) Poland (8%) Ukraine (7%) Bulgaria (5%) Serbia (4%) Other (10%) 7% 8% 12% 12% 8% Source: Raiffeisen International. 8% 10% 3/17/

15 Erste Group: CESE Loans (Eur 58 bn, Dec. 09) 3% 2% 1% 11% Czech Rep. (33%) 33% Romania (23%) Hungary (15%) Croatia (12%) Slovakia (11%) 12% Slovenia (3%) Ukraine (2%) Serbia (1%) 15% Source: Erste Group. 3/17/ %