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Eastern Europe Bankers Request ECB Help PDF Print E-mail

Normal bank lending won't resume in central and eastern Europe unless the European Central Bank steps in to provide funding, bankers active in the region said Friday.

A number of central banks from the region have asked the ECB to accept their government bonds as collateral in its refinancing operations as a way of injecting euro liquidity into their financial systems.

Speaking during the annual meeting of the European Bank for Reconstruction and Development, bankers backed those calls.

"It will be very difficult to get the motor up and running (without ECB help)," said Herbert Stepic, chief executive officer of Raiffeisen International, an Austrian-based bank that is one of the biggest lenders in eastern Europe.

Gyorgy Suranyi, head of eastern Europe for Italy's Intesa Sanpaolo, shared that view.

"Without the involvement of a real lender of last resort, we don't see a solution," he said, during a discussion on the financial crisis.

Stepic and Suranyi said that banks based in western Europe that have large eastern European operations - which they term "systemic banks" - have not withdrawn funds from the region and have no intention of doing so.

"I haven't met a banker who thought to withdraw capital," Stepic said.

However, both said that foreign banks that didn't have a long-term commitment to the region had withdrawn, leaving a funding gap that needs to be closed, partly with ECB help.

"None of the systemic banks have withdrawn a single cent," Suranyi said. "Beyond the systemic banks...they are the ones that have withdrawn. This financing gap creates an issue. The systemic banks are not able to fill that gap."

Suranyi, formerly head of Hungary's central bank, warned of the consequences for western Europe if eastern Europe's financial system is allowed to collapse.

"If you destabilize this group of countries by destroying the financial sector, it's going to be incomparably more painful for the core countries," he said, noting that a quarter of Germany's exports go to eastern Europe.

 
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