Foreign Banks and the Vienna Initiative

Foreign Banks and the Vienna Initiative

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We use data on 1, 294 banks in Central and Eastern Europe to analyze how bank ownership and creditor coordination in the form of the Vienna Initiative affected credit growth during the 2008a€“09 crisis. As part of the Vienna Initiative western European banks signed country-specific commitment letters in which they pledged to maintain exposures and to support their subsidiaries in Central and Eastern Europe. We show that both domestic and foreign banks sharply curtailed credit during the crisis, but that foreign banks that participated in the Vienna Initiative were relatively stable lenders. We find no evidence of negative spillovers from countries where banks signed commitment letters to countries where they did not.Our priors about the impact of government support versus VI participation on credit growth differ. ... had a strong positive impact on banksa#39; financial positions this may have outweighed the impact of a shift towards home-country lending.

Title:Foreign Banks and the Vienna Initiative
Author:Mr. Ralph De Haas, Ms. Yevgeniya Korniyenko, Mr. Alexander Pivovarsky, Elena Loukoianova
Publisher:International Monetary Fund - 2012-05-01


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