Wednesday, March 4, 2009

5 central banks defend their economies

Wednesday, March 4, 2009

PRAGUE: Five Eastern European central banks issued a joint statement Wednesday in defense of their financial systems, saying reports the region's banks were in trouble were "simplified and misleading."

The central banks of the Czech Republic, Bulgaria, Poland, Romania and Slovakia all said warning about the exposure of many Western banks to the financial crisis in Eastern Europe posed "a high reputational risk" to their financial systems.

Last months, credit ratings agency Standard & Poor's said "all the ingredients for a crisis are in place" in Eastern Europe because of rising government debt and a heavy reliance on foreign lending.

Credit ratings agency Moody's also said recently that faltering economic conditions in Eastern Europe will continue to hit local subsidiaries of major Western banks, which could spill over to their corporate parents, primarily in Austria, Italy, France, Belgium, Germany and Sweden.

The statement called talk of bank troubles speculation and said it was "often simplified and misleading and could have negative implications for banks operating in these countries."

"Such self-fulfilling speculation totally disregards fundamental economic developments in the countries and creates misperceptions that could inevitably be detrimental to both the region and Europe as a whole," the statement said.

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