The European Bank Coordination “Vienna” Initiative is a framework for safeguarding the financial stability of emerging Europe. The Initiative was launched at the height of the first wave of the global financial crisis in January 2009. It brought together all the relevant public and private sector stakeholders of EU-based cross-border banks active in emerging Europe, which own much of the banking sectors in that region and also hold a significant part of government securities..
The Initiative has provided a forum for decision making and coordination that helped prevent a systemic banking crisis in the region and ensured that credit kept flowing to the real economies during the crisis. The Initiative specifically sought to limit the negative fallout from nation-based uncoordinated policy responses to the global crisis and to avoid a massive and sudden deleveraging by cross-border bank groups in emerging Europe.
As the new wave of the eurozone crisis unfolded toward the end of 2011, signs of a severe credit crunch within the eurozone, and of rapid deleveraging in emerging Europe, multiplied. Furthermore, some serious gaps in regulatory coordination between home and host countries’ authorities once again became apparent.
Host countries, where foreign banks branches or subsidiaries are systemic, faced problems that were not fully recognised when the home-host principle for supervision was established prior to the 2008 crisis. A particular additional challenge remained in finding ways of cooperation with non-EU member countries, some of which are important hosts to EU-based banks.
Reflecting these circumstances, Vienna 2.0 aims to ensure that:
- The deleveraging process is managed to minimise systemic risks in emerging Europe.
- Home countries coordinate more closely with host countries to take better account of potential systemic risks concerns in host countries. Fiscal authorities would also be involved more directly in home-host coordination.
The work within the Vienna Initiative 2.0 aims for practical results by monitoring of, and reporting on, the deleveraging process and by setting up temporary structures where private and public sector decision makers meet to exchange experience and discuss appropriate actions. Within such structures, two working streams have been set up to provide input into new regulatory developments:
At the Vienna Initiative 2.0 Full Forum meeting in March 2012, a set of principles for Home-Host authority coordination was agreed upon to enhance cooperation and coordination. The principles agreed upon were based on experiences and consultations during the earlier phases of the Initiative.
The Vienna Initiative 2.0 is led by a Steering Committee, chaired by Marek Belka, President of the National Bank of Poland.