“We expect our exposure to Romania to follow the return in consumer confidence and in economic growth. Erste will continue to be the main supporter of the economy through BCR,” Wimmer told ZF.
Erste Group made public a gross exposure to Romania of over EUR8.6 billion at the end of 2011, up by EUR736 million against March 2011, when the Vienna Initiative expired.
However, in the third quarter of 2011, the Austrian group saw its exposure to Romania fall by EUR480 million especially because of the repayment of financing to BCR and because of a reduction in the portfolio of government bonds. The trend of lowering exposure to bonds issued by the Finance Ministry continued until the end of the year.
The exposure of Austrian banks to Romania came under scrutiny after downward risks emerged, in part under pressure from the Austrian supervisory authorities, with president Traian Basescu intervening even with European authorities to ask for financing to be maintained.
The main foreign banks in Romania agreed as part of the Vienna Initiative in March 2009 to keep their exposure to the Romanian market until March 2011.
From March 2009 until the end of 2011, the exposure of the Austrian group that controls the largest bank in Romania rose by over EUR1.8 billion, according to data provided by Erste Group to Ziarul Financiar.
Erste thus becomes the first major foreign bank to make public exact data on the volume of local exposure and its evolution, apart from verbal commitments to maintain financing for Romania.
Wimmer says it is important to analyze exposure over at least one year, as the quarterly changes can result from various evolutions of the day-to-day business, and specifies that the figures above are calculated based on the methodology of reporting exposure to the Romanian central bank (BNR).
Despite the fact that the agreement with the foreign banks made under the Vienna Initiative expired, they continue to send data periodically to the central bank in the initial format designed for the monitoring of exposures.
“The figures we report to the central bank include our stake in BCR (close to 93.52%), Erste Group’s financing for the BCR, cross-border commercial operations of Erste Group and the exposure of Erste Group to Romanian bonds, but do not include the local exposure of BCR,” Wimmer explained for ZF.
The subject of the exposure of foreign banks to Romania returned to attention after the Bank of International Settlements (BIS), based in Basel and known as “the bank of central banks,” recently published statistics for the 3rd quarter of 2011 on banks’ cross-border exposure. BIS is the only institution that centralizes such data internationally, and figures for the third quarter of 2011 point to a significant decline in the exposure of Austrian banks in particular to Romania.
BIS data raised question marks, given that Andreas Treichl, head of Erste Group and Steven van Groningen, president of Raiffeisen Bank Romania had just had a meeting with president Traian Basescu to reassure him that their banks would not cut their exposure to Romania.
Under the circumstances, the primary interpretation that the Austrian banks had cut their exposure raised controversies, with bankers citing an inaccurate reading of BIS figures.
This was not the first time that the figures appeared in the press in this way, but when they indicated non-significant increases or declines, they were no cause for debate.
Wimmer says unlike in reports to the Romanian central bank, the BIS statistics includes banks’ cross-border liabilities in all currencies, plus local liabilities in foreign currency of their subsidiaries, as well as local liabilities in local currency of the subsidiaries of the reporting banks.
Moreover, the reports submitted to the central bank do no reflect the BCR goodwill, which Erste adjusted by EUR700 million in 2011, but which is to be found in reports to the Bank of Austria. Wimmer says at the end of 2011 Erste contributed around EUR100 million to increasing BCR’s capital.
In fact, Erste only directly reports to the Romanian central bank and to the Austrian central bank, while the Bank of International Settlements takes data from the Austrian central bank and treats them according to its own methodology.
Wimmer believes a set of data from the statistics of the Bank of International Settlements are worth taking into consideration – they show that in 3Q of 2011 the liabilities of Austrian banks to Romania fell by EUR1.7 billion against 2Q, to EUR29 billion. But data indicate a slight rise against 3Q of 2010.
“The interpretation we give to the latest data published by BIS is that the fluctuation of Austrian liabilities which matured in the third quarter of 2011 is the result of a decline in local exposure and only one third of the change was generated by the reduction of intra-group financing. But in order to identify the trend, one has to analyze a period of at least a year,” says the head of Erste Group finance.
He says from Erste’s point of view what matters is the commitment to the local market, and, of course, the level of lending activity. “Erste Group has boosted its exposure to Romania in the last year, in terms of equity capital of BCR, financing, portfolio of local loans.”
Wimmer says Erste and its local subsidiary will continue to finance the economy in the coming years, in line with its commitment to Romania’s long-term development, specifying that lending in lei will be a priority.
(English version by Daniela Stoican)