Istanbul, October 5, 2009—The European
Bank for Development and Reconstruction (EBRD), the European Investment
Bank (EIB) Group, and the World Bank Group* on Monday warned against complacency
in the face of significant challenges that stand in the way of economic
recovery in Central and Eastern Europe.
Meeting in Istanbul at the World Bank and International Monetary Fund Annual
Meetings, EBRD President Thomas Mirow, EIB President Philippe Maystadt
and World Bank Vice President Philippe Le Houérou said that unprecedented
coordinated international action had helped stave off a systemic crisis
in the region. But more needed to be done and they pledged renewed action
on the part of their institutions to support the region's return to growth.
The three international financial institutions (IFIs) were very well on
track in delivering on the Joint IFI Action Plan with commitments of already
€16.3 billion by end of September 2009 (€12.4 billion already signed)
in crisis-related financial support for the Central and Eastern European
region, they said. However, efforts had to be continued to support Central
and Eastern Europe into its recovery period.
Launched by the three IFIs on February 27, 2009, just as the global economic
crisis was heading towards new depths, the Joint IFI Action Plan in support
of banking systems and lending to the real economy in Central and Eastern
Europe aimed to:
- support banking sector stability and lending to the real economy in crisis-hit
Central and Eastern Europe with a financing plan of up to €24.5 billion
- commit to make joint assessments of large bank groups’ financing needs;
- rapidly deploy assistance in a coordinated manner, according to each
institution’s geographical and product remit.
Financing was complemented with efforts
to coordinate national support packages and policy dialogue among key stakeholders
in the region, in close collaboration with the International Monetary Fund
(IMF), the European Commission, and other key European institutions.
At their meeting in Istanbul, the three signatories of the Joint IFI Action
Plan presented their first Joint
Progress Report, discussed new
challenges ahead, and future areas of cooperation. The meeting was attended
by key EU-based parent banks of subsidiary banks in Central and Eastern
Europe, their home and host country supervisors, fiscal authorities and
central banks, as well as the European Commission, the IMF and the European
Central Bank (ECB).
Their report noted that policy dialogue cooperation between the three IFIs,
in close collaboration with the IMF and the European Commission, had facilitated
the management of the crisis on a private-public sector platform under
the European Bank Coordination (Vienna) Initiative.
This had strengthened incentives in preserving European integration. Actions
had been integrated into macroeconomic crisis response programs, supported
by the IMF and, in the framework of EU economic and financial policies,
also by the European Commission.
These efforts have contributed to avoiding a systemic regional crisis in
face of massive economic shocks, noted the report. Parent banks have continued
to support their subsidiaries and viable local banks have managed to stay
However, despite signs that the grip of the economic crisis is easing,
and despite country variations, significant challenges remain ahead before
the region can get firmly on the road to recovery and growth.
Specifically, credit to the real economy—and SMEs in particular—is still
shrinking, non-performing loans are rising, bank recapitalization needs
remain large and unemployment is increasing rapidly.
The Institutions believe that economic recovery will depend critically
on private-sector growth, which will not re-emerge without lending to the
This requires, in addition to vital funding, strengthening banks’ balance
sheets, helping mitigate financial risks in the region and restructuring
of private debt where necessary and possible. It will be important
to address the vulnerability of foreign exchange exposures, in tandem with
the development of long-term local currency funding and capital markets.
Continued policy dialogue is needed to strengthen regulatory frameworks.
Looking forward the three institutions pledge to persevere in their efforts
under the Joint IFI Action Plan to support lending to the real economy
and in the region, while addressing the challenges ahead in close collaboration
with other international and European institutions and governments.
Table 1. Commitments and Delivery
under the Joint IFI Action Plan
Available as of
end-September 2009 2/
of which signed as
end-September 2009 2/
Indicative for 2009
| World Bank Group
1/ Of the €24.5 billion, proportional for 2009.
2/ Board approvals (EBRD, EIB, MIGA, IBRD), signings (IFC).
3/ Includes local bank support and trade finance. Excluding these, total
delivery was €1.9 billion.
4/ Of which €6.3 billion signed and €1.7 billion disbursed.
* The World Bank Group, which includes
the International Finance Corporation (IFC), the Multilateral Investment
Guarantee Agency (MIGA), and the International Bank for Reconstruction
and Development (IBRD), is providing support of about €7.5 billion:
- IFC, through its crisis response initiatives
in sectors including banking, infrastructure, and trade as well as through
its traditional investment and advisory services, is expected to contribute
up to €2 billion;
- IBRD intends to increase lending in
Europe and Central Asia up to €16 billion in 2009-10 out of which up to
€3.5 billion is envisaged for addressing banking sector issues in emerging
- MIGA will provide political risk insurance
capacity of up to €2 billion for bank lending.