Monday, September 28, 2009

For Immediate Release
Monday, September 28, 2009

Below are Links to News Stories Filed Monday from the Reuters Central European Investment Summit Held in Vienna and Warsaw

E. Europe banks, regulators head for FX loan fight
VIENNA (Reuters) - European Central Bank governing council member Ewald Nowotny called for tighter restrictions on foreign currency lending in eastern Europe on Monday, saying it had no place in credit for ordinary consumers.
Speaking at the Reuters Central European Investment Summit, Nowotny -- who oversees some of emerging Europe's biggest lenders as head of the Austrian central bank -- said general rules were needed if banks' self-regulation did not help.
"There is a very clear message, both from the local regulators and from the home regulator in Austria that we want to discourage foreign currency lending," Nowotny told the summit at the Reuters office in Vienna.
"It is not about forbidding it altogether. There are some ways to have a financial hedge where it may make sense. But for instance financing the real estate infrastructure of a country just by foreign currency lending has been a mistake."
"There is no way to deny that FX lending has substantial macroeconomic risks."
Preemptive action by central banks and ratings agency warnings last year that the region could become the "sub-prime of Europe" helped encourage lenders to cut back low-interest rate lending in euros or francs in Poland, Hungary and others.
But managers from leading emerging European banks, also at the Reuters summit, said retail lending in foreign currencies was here to stay as they battle to restart growth in the region.
"There will be more reluctance to lend in foreign currencies, but it won't work without them, in particular in countries where interest rates are high," said Martin Gruell, Chief Financial Officer with Raiffeisen International, eastern Europe's second biggest lender.
The full text of the story is on at:

ECB's Nowotny sees no exit any time soon
VIENNA (Reuters) - Recession in the euro zone is over but growth will remain sluggish next year, so there is no need to raise interest rates soon, European Central Bank (ECB) Governing Council member Ewald Nowotny told Reuters on Monday.
However, the ECB will look vigilantly at monetary and business indicators that could indicate a rise in inflationary expectations, Nowotny said at the Reuters Central European Investment Summit, which began on Monday in Vienna and Milan.
"What we see is that this very strong and dramatic decline of the economy has reached the bottom," Nowotny said.
"We will experience in most (European) countries in the third and fourth quarters of 2009 positive growth rates, so that means technically the recession will end this year," he told Reuters.
"But the growth that we see is still very sluggish for the next year. For 2010 for the euro zone there will be growth rates of 0.5-1 percent. That means it is a very slow recovery, the economy is very weak," he said.
Nowotny stuck to the ECB's policy of not pre-committing to interest rate changes, but he said he did not see personally a need to move away from current record low interest rates of 1 percent any time soon. The ECB was also not planning to unwind its support for money markets this year, he said.
"Looking at all those factors (influencing inflation expectations), for the time being I personally would not see a need for any policy changes soon," Nowotny told Reuters. "But we are vigilant to observe how things are developing."
The full text of the story is on at:

Pre-crisis boom won't return: Czech central banker Hampl
VIENNA (Reuters) - Economic growth in the Czech Republic as well as other European countries will likely not return to levels seen before the global financial crisis, Czech central bank Deputy Governor Mojmir Hampl told Reuters on Monday.
Speaking at the Reuters Central and Eastern Europe Investment Summit in Vienna, Hampl said the Czech recovery would likely have the shape of an asymmetric "W," with a second low point, less deep than the first one, around mid-2010.
Hampl also welcomed a package of tax hikes and spending cuts approved by the Czech parliament on Friday, saying it was a sign of responsibility and a proper response to the country's fast-growing fiscal gap despite a poor growth outlook.
The full text of the story is on at:

UniCredit sees CEE bad loans peak in '10
MILAN (Reuters) - Italy's UniCredit SpA, the biggest lender in central and eastern Europe, expects non-performing loans to peak next year, regional unit chief Federico Ghizzoni said
He told the Reuters Central European Investment Summit that UniCredit, Italy's biggest bank by market value, also expects provisions for bad loans in the region to top out this year.
Worries over the scale of loan defaults in central and eastern Europe -- which generates about 16 percent of UniCredit's revenues -- prompted warnings last year that states and western banks in the region could be threatened by the fallout. Those concerns have receded.
"I think the peak in terms of non-performing loans could be reached in 2010, even though with a slight increase from 2009 to 2010, so not the jump we saw between '08 and '09," Ghizzoni told Reuters.
"In term of provisions on the effects of P&L (profit and loss), the peak will be in '09."
Ghizzoni told Reuters that while loan growth and volumes would not reach pre-crisis levels over the next two or three years they would start to rise.
Non-performing loans in the area would also be far below the 30 percent seen during the Asian crisis of the late 1990s in part because families' indebtedness was well below that of western Europe, he said.
The full text of the story is on at:

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Nina Andrikian (New York)
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