“You need to have a banking crisis to really get as cautious as you should have been in the first place.” Thomas Mirow,
From Central Europe to now the Middle East, the European Bank for Reconstruction and Development is playing a pivotal role in attempts to keep economies moving. Here, its President Thomas Mirow tells Ernst & Young’s Maryam Kennedy about the challenges of running the world’s only transition bank.
The European Bank for Reconstruction and Development (EBRD) was created to support the development of market economies following the widespread collapse of communist regimes. Its role is to provide project financing for banks, industries and businesses.
After the credit markets contracted, EBRD played a key role in the inception of the “Vienna Initiative” in 2009.
This brought together the combined forces of the governments and authorities from Western banking groups and their Eastern subsidiaries, the IMF, European institutions and multi-lateral development banks such as the EBRD. Funding of €25b was pledged over two years for Eastern European banks to lend on to businesses.
The focus now, though, is “Vienna II,” a new initiative that aims to keeps stability in Eastern Europe’s economies through continued lending.
“The situation is different now because we do think a certain degree of deleveraging this time will be unavoidable because of the constraints all major banks are under in terms of their capitalization,” says Mirow, EBRD’s president.
Additionally, the EBRD is expanding its work in the Middle East and North Africa, focusing on four countries — Egypt, Morocco, Tunisia and Jordan.
When Mirow assess the results of EBRD’s work so far, he cites the “shining example” of Poland as a country that has exceeded expectations in terms of its economic performance.
“Poland has had quite a conservatively managed banking system; we haven’t seen Polish banks taking risks. This is because they had their own banking crisis 10 years earlier. One of the key lessons seems to be that you need to have a banking crisis to really get as cautious as you should have been in the first place.”
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