Wednesday, November 23, 2011

Raiffeisen Romania Sees Little Impact From Austrian Credit Rules

By Andra Timu and Irina Savu

Nov. 23 (Bloomberg) -- Raiffeisen Bank International AG’s Romanian unit will not be “significantly impacted” by the decision of Austrian regulators to limit new loans in central and eastern Europe as it has sufficient capital and internal funding sources, the unit’s head said.

Raiffeisen, one of the five-biggest lenders in Romania, may issue bonds next year through a medium-term notes program of about 1.5 billion euros ($2 billion) as it plans to wait for the right moment to get a “reasonable price,” Chief Executive Officer Steven van Groningen said in an interview in Bucharest.

Austria’s banking regulators are restricting new loan business of Vienna-based lenders, including Raiffeisen, Erste Group Bank AG and UniCredit SpA’s Bank Austria AG, in central and eastern Europe to 1.1 times the deposits and wholesale funding that the lenders’ local units are able to raise on their own.

They are also requiring the three banks to hold as much as 10 percent of capital from 2016, 3 percentage points more than required under rules from the Basel Committee on Banking Supervision. Raiffeisen’s loan-to-deposit ratio was 1.3 in Romania, 1.5 in Ukraine and 1.2 in Hungary at the end of June.

“I’m not concerned because I get almost no money from Raiffeisen Group, so for us it’s not an issue,” van Groningen said yesterday. “I think it’s a healthy measure in principle in order to limit the systemic risk. In Romania, it’s possible we will see even more pressure on attracting deposits than in the past and the interest rates might go up.”

‘Plenty of Capital’

Austrian banks, which control about 39 percent of the Romanian market, have lent about $266 billion to borrowers in the formerly communist parts of Europe, the most of all countries reporting to the Bank for International Settlements and equivalent to about 70 percent of Austria’s gross domestic product. Those numbers don’t include the investments of Bank Austria, which are attributed to Italy.

Raiffeisen Romania has “plenty of capital” to support lending in the country as demand for new loans will probably remain subdued because of low economic growth, the CEO said.

“I don’t expect a lot of demand for financing next year and this has to do with expectations about economic growth,” van Groningen said. “We see some growth but not significant one.”

Raiffeisen owns lenders in 15 formerly communist countries from Slovenia to Russia, ranking only behind UniCredit and Erste by assets in the region.

Romania’s export-driven economic recovery will slow next year to a growth of between 1.8 percent to 2.3 percent, compared with a previous forecast of 3.5 percent, according to the International Monetary Fund.

--With assistance from Boris Groendahl and Zoe Schneeweiss in Vienna. Editors: Zoe Schneeweiss, James M. Gomez

To contact the reporters on this story: Andra Timu in Bucharest at; Irina Savu in Bucharest at

To contact the editor responsible for this story: James M. Gomez at

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