A new plan to maintain banking sector stability in emerging Europe was agreed in Vienna. The public – private forum, dubbed Vienna 2.0, essentially aimed to agree measures to keep foreign banks in emerging Europe and keep them solvent. It is of vital importance to Romania, where foreign banking groups play a pivotal role in the country's economy.

Measures agreed on include a reaffirmed free movement of bank liquidity and capital and coordination of financial stability measures between home and host country authorities, along with cross-border supervision. Coordination among fiscal authorities has been called for, while supervisors, central banks, and fiscal authorities have been asked to take account of the implications of their actions for other national jurisdictions and for the European financial system as a whole. To make sure new rules are being followed, a Steering Committee will report on the proposed approach.

The original European Bank Vienna Initiative in 2009, at the height of the global economic crisis, came about to help maintain financial stability in Central, Eastern and South Eastern Europe and pushed foreign banks in the region to maintain subsidiaries with adequate funding. The latest meeting, on March 12 and 13, aimed to “better coordinate banking sector regulation and supervision and to contain negative spillovers between the euro area and emerging Europe.”

Hosted by the European Commission (EC), the meeting was attended by officials from governments and central banks, the International Monetary Fund (IMF), the European Bank for Reconstruction and Development (EBRD), as well as representatives from the private foreign banking groups active in the region. A set of principles for stability was agreed and the steering group will be charged with turning them into operational recommendations.“Banking groups active in the region and national as well as European authorities should cooperate closely in efforts to maintain credit conditions consistent with sustainable economic growth,” according to the proposals.

Fears of foreign banking groups pulling out of Romania, or at the least reducing financing to subsidiaries, have been widespread. The banking groups have responded with promises to keep banking capital in Romania and so far they have kept up their commitments.

Liam Lever, liam@romania-insider.com