“If regulators are bombarding us with ever-increasing capital requirements, how can we lend? This is ridiculous,” Herbert Stepic, the CEO of Raiffeisen Bank, said on Tuesday during a panel organized by Euromoney Conferencesin Vienna.
On Monday, the CEO of Erste Bank, another Austrian bank with a big presence in CEE, said that the different regulations imposed by countries belonging to the European Union upon the banking sector in the wake of the financial crisis to limit the flows of capital across borders were contrary to the EU’s principles of free flow of capital.
Stepic said the problem was the same both in countries that are part of the EU and in those that have still not joined the Union.
“One country is forbidding us to transfer dividends; other countries are forbidding us to transfer liquidity within the group,” Stepic told Emerging Markets after the panel.
“I can’t mention the countries because I still want to do business tomorrow in those countries. But that is contradictory, I mean I cannot satisfy my investors’ needs for dividends, and I can’t transfer [the cash].”
“I cannot satisfy my cash management needs when I need cash or liquidity in country A and I have all the liquidity in country B, if I cannot transfer it. That’s impossible,” Stepic added.
During the panel, he said that one central bank in one country was considering increasing core capital requirements to 15% from 12% and that this would hurt that particular country, because banks would look for business in markets where they can get returns.
‘BALKANISATION OF BANKING’
Bankers at the conference stressed that the financial institutions present in Central and Eastern Europe were mostly commercial banks that lend money to businesses and individuals, as opposed to investment banks.
Banks have learned their lesson from the crisis but now regulators “should understand that it’s not by over-regulating banks that they will solve the problem,” Gianni Franco Papa, head of the CEE division at Italy’s UniCredit, the biggest bank in CEE, said.
“We have different regulators imposing contradictory regulation. It’s incredible what we have to go through,” Papa added.
Stepic said the measures taken by the regulators were not justified.
“It’s ring-fencing. I call that the Balkanisation of banking – this is what is happening,” he said.
“We are fighting against it, that is one of the jobs of the Vienna initiative number II, in order to avoid that and bring the regulators back to normal. Otherwise, we cannot service the region as a multinational bank in the future, that’s impossible.”
But other bankers believe the regulations are here to stay and financial institutions will need to adapt to a new reality.
“The regulations, like it or not, are there. The good news is that there is a willingness to compromise,” Zdenek Turek, CEO for Central and Eastern Europe at Citi, said.
“The world has changed for the banks.”