Austria's Banks Tighten Lending in CEE, Bulgaria May Face Pressure

Finance | November 22, 2011, Tuesday // 15:05|  views

A sign indicating a car wash stands in front of a branch of Raiffeisen Bank, an affiliate of the Austrian owned bank by the same name, in Budapest, Hungary. Photo by EPA/BGNES

Austria's banks will have to tighten the rules on ending and capital quotas in Central, Eastern and south-eastern Europe under rules imposed by Austrian authorities in a bid to protect the country's AAA credit rating.

Erste Group Bank AG (EBS), Raiffeisen Bank International AG (RBI) and UniCredit SpA (UCG)'s Bank Austria AG will be prevented from loaning significantly more than they raise in local deposits in countries such as Hungary, Romania and Ukraine starting next year, the Austrian central bank said in a statement on Monday. That would limit their ability to fund credit growth with loans from the parent company.

The move is expected to affect the availability of credit and put pressure on countries like Hungary, Romania, Ukraine or Bulgaria, according to foreign analysts.

Local bankers however say that it has been long ago since the banks in Eastern Europe stopped being directly linked to the well-being of mother companies.

Bulgarian banks do not need support from abroad and are doing fairly well on their own, they say. According to them with high capital and profit levels in the banking system, there is little risk of a systemic problem.

From next year, Austria's banks will have to limit their lending to 110 euros (148 dollars) for every 100 euros of local deposits, according to the package of measures presented by the National Bank and the Financial Market Authority.

Banks will also have to apply stricter equity requirements already from 2013, five years earlier than foreseen under the international Basel III guidelines.

In addition, there will be an obligation to hold an additional protective buffer of equity of up to 3 per cent of banks' assets from 2016.

The five biggest banks in Bulgaria are UniCredit Bulbank; DSK Bank, a unit of OTP Bank Nyrt., Hungary's largest bank; United Bulgarian Bank, owned by the National Bank of Greece SA; Raiffeisenbank Bulgaria and Eurobank EFG Bulgaria.

Greek banks control about 28% of banks' total assets in Bulgaria.

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Tags: UniCredit SpA (UCG)'s Bank Austria AG, Raiffeisen Bank International AG (RBI), Erste Group Bank AG (EBS), Ukraine, Hungary, EU, greece, Romania, Bulgaria, recapitalization, banking sector, banks, Greek, Austrian, French, Eurozone, Eastern, europe, European, Bulgarian


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