The European Bank Coordination Initiative, usually known as the Vienna Initiative, was well placed to address the threats posed the financial sector and eastern Europe by the Eurozone sovereign debt crisis of 2011.
‘Vienna 2.0,’ as it was soon nicknamed, faced dangers of a different kind from those confronted in 2009 but could call on the same networks and approaches to address the problems.
This time the risk was that of excessive and disorderly deleveraging as well as a new credit crunch as home and host regulators struggled to deal with funding strains.
Lack of coordination between regulators, central banks and fiscal authorities threatened to force pan-European banks to hold significantly more capital and liquidity in all their subsidiaries, ring fencing which could have been highly damaging to the region, the banks themselves and, ultimately, their home bases as well.
A Vienna Initiative meeting in March 2012 defined responsibilities for those involved as follows:
- European institutions to play a central role in supervisory coordination, macroprudential oversight and mediation among national authorities
- IFIs to help via surveillance, data collection, policy advice and financial support
- Banking groups and European authorities to cooperate to maintain credit conditions consistent with sustainable economic growth.