By Peter OBIORA InvestAdvocate
Lagos (INVESTADVOCATE) – The International Monetary Fund (IMF) Thursday announced that the Steering Committee of the Vienna 2 Initiative have set five (5) priorities for year 2014 after a meeting hosted and chaired by Raiffeisen Bank International in Vienna.
According to a Press Statement by Silvia Zucchini, Media Contact of the International Monetary Fund (IMF) and made available to InvestAdvocate, one of the priorities is to tackle the critical problem of Non-Performing Loans (NPLs) in Central, Eastern and South-eastern European Countries (CESEE) through a coordinated multiple -stakeholder effort.
The IMF said NPL levels in many countries in the CESEE region are quite high and still rising. ‘’This hinders credit growth and economic recovery. The Initiative will engage banks, regulators and International Financial Institutions (IFIs) to create incentives for jump-starting a speedy and fair NPL resolution in 2014 and design joint country action plans in this area’’ the IMF said.
Another priority is to promote an all-inclusive Banking Union, with a special focus on non-EU members in the Southeastern European (SEE) region. ‘’Given the Euro area banks’ systemic importance in these countries, and with most countries on the path to EU membership already, it is critical that a coordination framework is developed between non-EU member SEE countries and the new European supervisory and resolution authorities,’’ the IMF said.
According to this initiative, the operationalisation of the Banking Union, including the Single Supervisory Mechanism, bank resolution, and backstop design, requires continuing attention for the EU non opt-in countries. ‘’The Vienna Initiative will actively advise and support this process, acknowledging meanwhile the importance of the speedy completion of the EU Banking Union,’’ the IMF affirmed.
The third priority area is to closely monitor deleveraging and credit trends in the CESEE region. The IMF affirmed that cross-border funding withdrawal, crisis legacy issues such as high non-performing loans (NPLs), and the prospect of tightening financing conditions from unwinding of unconventional monetary policy actions by advanced economy central banks can together present a considerable risk to credit recovery, and therefore growth, in the region.
‘’The Steering Committee will continue its close monitoring to spot any systemic risks at an early juncture through the Initiative’s flagship products the Deleveraging and Credit Monitor and the Bank Lending Survey,’’ the Fund said.
The fourth priority is to increase credit enhancement and risk mitigation to support new credit in the context of still high risk perception in the CESEE region.
The IMF says a working group has been formed to evaluate existing credit support schemes and to come up with concrete proposals for more effective credit enhancement schemes.
Lastly is the development of faster local funding sources in CESEE countries, moving away from a model dependent on cross-border financing which requires greater and fast diversification of funding sources.
‘’The development of local currency capital markets is of particular importance. Progress in this area must be accelerated to help credit and recovery and the IFIs participating in the Vienna Initiative can proactively support this process,’’ the IMF said.
