Page 30 - BNE_magazine_07_2020

30 I Central Europe bne July 2020
Banks in Central, Eastern and Southeastern Europe have been plunged into one of their worst years since the international financial crisis of 2007-2008.
CEE banks heading for one of their worst crises in 10 years
Clare Nuttall in Glasgow
Banks in Central, Eastern and Southeastern Europe have been plunged into one of their worst years since the international financial crisis of 2007-2008, says
a new report from the European Investment Bank (EIB).
The region’s banks started the year in
a relatively strong position, with easing credit standards and robust demand
for loans, said the EIB, on the release
of its latest CESEE Bank Lending Survey, a bi-annual survey of around 90 local banks, banking groups and financial institutions across the region.
However, after the coronavirus (COVID-19) pandemic spread across Europe and lockdowns were imposed, banking groups have drastically revised their expectations. They now anticipate the overall demand for financing to contract sharply, credit standards to tighten significantly and loan approval
rates to decline. In addition, says the EIB report, as loan application quality decreases, non-performing loans (NPLs) are anticipated to rise for the first time since 2015.
“The COVID-19 shock has changed
the expectations of banking groups in the CESEE region significantly. Higher uncertainty will persist over the coming months,” said EIB chief economist Debora Revoltella.
In a webinar hosted by the EIB on June 12, the lead author of the report Luca Gattini stressed the similarities of the pandemic’s impact on banking sectors across the region, and governments’ policy responses.
How the banking sectors entered the crisis in the various countries in this region from Poland to North Macedonia all had common components, though they were nuanced differently. All,
by and large, had seen quite a robust demand for credit in the last two to three years, and all had also seen significant decreases in NPLs, he said.
Some countries’ banking sectors were stronger because they had exited
the previous crisis in a stronger way, said Gattini, giving the example of Poland, whose banking sector was less weakened by the crisis than Romania’s. “Nonetheless, in the last few years there has been convergence,” Gattini added, “and this brought all the banks to enter the crisis in a rather healthy way.”
“When it comes to the exceptions today, frankly because this is really a common shock, hitting the region and the world, the expectations more or less changed simultaneously, but also similarly. Even the actions taken at the national level are very similar across the countries, showing how the challenges are the same across countries.”