Friday, November 25, 2011

Romania's president says Austria not playing fair

BUCHAREST, Nov 24 (Reuters) - Romania's President Traian Basescu said on Thursday he was concerned about new Austrian measures to limit lending in central and eastern Europe, which he said were unfair and would leave his country's economy vulnerable to a credit squeeze.

Earlier this week Austrian regulators proposed rules linking lending in central, eastern and southeastern Europe to the amount of refinancing banks can arrange for themselves locally.

"I would like to express my concerns. I would like to think that the Bank of Austria's announcement over a reduction of capital inflows ... was either a mistake or a misunderstanding of its impact," Basescu said at a financial seminar.

"You have made huge profits and if you are now getting ready to leave Romania unfinanced during the crisis, we will think it is an act lacking fair play towards Romania. I don't want to believe we will be left to pay the bill for banks' greed."

Basescu's comments reflect growing concern across central and eastern Europe about a steady withdrawal of funds by western-owned banks that could cripple growth in the region's emerging economies.

Speaking at the same seminar, Romanian central bank deputy Governor Cristian Popa said the proposed measures did not suggest parent banks would reduce their exposure to Romania, but there was a risk that the pace of funding growth would slow.

The new rules affect Bank Austria, a unit of Italian group UniCredit, Erste Group Bank and Raiffeisen Bank International, all of which have units in Romania and elsewhere in emerging Europe.

"We have to see how these measures will be applied," Popa told reporters. "I do not see a risk of capital stock falling but ... there could be aggregate limits on new funding flows."

Oil and gas group Petrom this week secured a credit line of 930 million euros from international banks including BNP Paribas, Societe Generale, Citi, Raiffeisen and UniCredit, indicating that loan markets are still open for solid credits.

Popa, who said there could be a shift from retail banking to more corporate lending, added that the loan-to-deposit ratio for the Romanian banking system as a whole was 110-120 percent.

The solvency ratio for the overall banking system was just under 14 percent, significantly above the euro zone's ceiling, which would leave banks with room to lend, Popa said.

"I think banks will make differences between countries in which they have exposure and ... between projects in these countries. To us it is important that projects with multiplying growth factors for the Romanian economy will be funded."

The Czech central bank will analyse Austria's planned guidelines for Austrian bank lending in emerging Europe, and was not consulted on the measures beforehand, its Vice-Governor Mojmir Hampl was quoted as saying.

The chief executive of Romania's largest bank, BCR, owned by Erste, said small and medium sized enterprises were unlikely to see much change in lending rules, and that financing of infrastructure projects there remained an "absolute priority".

"Erste, with more than 7.5 billion euros here in exposure will continue to support its subsidiary here, no question about that," said BCR head Dominic Bruynseels.

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