The European Bank Coordination Initiative or ‘Vienna Initiative’ was born amidst fears that the global financial crisis could provoke a chaotic withdrawal from emerging Europe by cross-border banks.
Such a danger was seen off but the lessons learnt from that initial crisis and the success of the Vienna Initiative framework have ensured that it remains in place to deal with new threats to the region.
Its birth dates from 2008 when International Financial Institutions (IFIs), governments and cross-border banks all expressed alarm that the deteriorating financial situation and lack of coordination between them could exert intolerable strain on the region’s banking infrastructure.
The overall squeeze in the financial sector and concern that state support for ‘home’ banks might force retrenchment in subsidiaries in emerging Europe combined to pose a potent threat to the region.
In November 2008, six parent banks with a large presence in Eastern Europe sent a letter to the European Commission calling for a swift response and for help in ensuring sufficient funding in the region.
Their appeal, along with active work by the EBRD and others, set in motion events which led to a meeting at the Austrian Ministry of Finance in January 2009 where all involved parties agreed to draw up a joint approach to the crisis.
As part of the approach, heads of the EBRD, EIB and the World Bank Group launched a Joint IFI Action plan to support banks and ensure adequate availability of credit in the region. The plan eventually delivered more than €33 billion.
By the beginning of 2010 the Vienna Initiative’s emphasis was shifting from crisis management to crisis prevention, addressing regional weaknesses such as the lack of local capital markets and exposure to foreign currency movements.
Reflecting this new focus on long-term issues, the Vienna Initiative also set up two working groups, one on the impact of Basel III rules on emerging Europe and the other on the resolution of non-performing loans (NPLs).
