Vienna Initiative 1.0

Overview


The Vienna Initiative was launched in January 2009 at the height of the global financial crisis.

The Initiative has been a powerful example of a successful relationship between the public and private sectors, as it brings together all the key stakeholders in the EU-based cross-border bank groups that are active in emerging Europe.

These include major international financial institutions as well as the most important European institutions, home and host country regulatory and fiscal authorities of large cross-border bank and the largest banking groups operating in emerging Europe.

The EBRD, EIB, European Commission, IMF, and the World Bank played a key role in the creation and further development of the Vienna Initiative.

The initial key objectives of the Initiative were to:

  • Prevent a large-scale and uncoordinated withdrawal of cross-border bank groups from the region, which could have triggered systemic bank crises not only in individual countries but in the region as a whole.
  • Ensure that parent bank groups maintain their exposures and recapitalise their subsidiaries in emerging Europe.
  • Ensure that national support packages of cross-border bank groups benefited their subsidiaries in emerging Europe and thus avoided a “home bias”.
  • Agree on, and implement, basic crisis management principles in the region.

As systemic risks started abating in the region from early 2010, the Initiative’s focus gradually shifted to critical region-wide policy issues that would make financial sectors in emerging Europe more resilient in the longer term, identified at the Initiative’s Full Forum meetings. Working Groups (WGs) were comprised with representatives from parent banks, regulators, central banks, ministries of finance, European institutions and IFIs.

 

Timeline


January 23 2009
- First “Vienna Initiative” (VI) meeting takes place at the Austrian Ministry of Finance under T. Wieser’s chairmanship, with participation from central banks and ministries of finance from many Central and Eastern European countries, key advanced EU countries which are home authorities of cross-border banks, and IFIs (IMF, EBRD, EIB, World Bank, IFC). EBRD / E. Berglöf introduces the concept of a collective action platform between the public and private sectors labeled “Vienna Club”. It is agreed that the IMF (with the lead of Anne-Marie Gulde-Wolf, Senior Adviser) develops principles of burden sharing between home and host authorities and banks.

March 17 2009 – The second “Vienna Initiative” meeting takes place in the Joint Vienna Institute under the chairmanship of T. Wieser (now also head of EFC). IMF (David Hardy, Division Chief) presents a distribution of burden sharing rules between home and host country authorities which are broadly agreed on to be used during the crisis.

September 24 2009 – First Full-Forum meeting of the Vienna Initiative in Brussels under the chairmanship of John Berrigan, Director DG ECFIN. The meeting takes stock of progress under the VI and discusses, for the first time, possible relaxation of deleveraging in the future – first signal of moving out of the systemic risk phase. Participants: 17 parent bank groups, their home and host supervisors and fiscal authorities, IMF, EC (also Competition policy), EBRD, EIB, WB, ECB, and CEBS.

March 17/18 2010 – Second Full-forum meeting under the Vienna Initiative in Athens to take stock; signal a moving out of the systemic risk phase (while the framework remains in place for future use and for selected countries); and discuss how to use the Vienna Initiative’s collective action framework beyond crisis management. Deputy Governor of the Bank of Greece Mr. Papadakis summarised that the VI had worked and should continue in view of continued risks. To test the usefulness of using the framework for policy discussions, two working groups are set up with topics of urgent relevance for the VI stakeholders: one on local currency market development and one on the absorption of EU funds. Participants: 20 bank groups, their home and host supervisors and fiscal authorities, IMF, EC, EBRD, EIB, WB, ECB, CEBS.

March 17/18 2011 – Third Full Forum meeting of the Vienna Initiative in Brussels to consider the recommendations of the two working groups (Local Currency and Capital Market Development and Absorption of EU funds) and decide on the Future of Vienna Initiative. The stakeholders assess that (i) the VI was a success for crisis management and its framework should be preserved as such given remaining risks; (ii) the VI’s main focus should be shifted to cover issues of crisis prevention that benefit from its unique private-public sector composition, based on the model of the first two working groups. Two new Working Groups are set up, one on the implications of the new Basel III regulations for emerging Europe; and the other on dealing with nonperforming assets. Interim reports are expected by end-September 2011.

March 24/25 2011 – The approach of the Vienna Initiative is brought to the euro zone discussions. In the European Council’s Conclusion on the new European Monetary System (EMS) the Vienna Initiative is cited as an approach for private sector involvement: “If, on the basis of a sustainability analysis, it is concluded that a macro-economic adjustment programme can realistically restore the public debt to a sustainable path, the beneficiary Member State will take initiatives aimed at encouraging the main private investors to maintain their exposures (e.g. a “Vienna Initiative” approach).”

For more information on the meetings of the Vienna Inititative and to view presentations, please view the full timeline.

Joint IFI Action Plan



The EBRD, EIB, and World Bank Group launched a Joint IFI Action Plan in support of banking systems and lending to the real economy in Central and Eastern Europe on February 27, 2009.  The plan’s objective was to commit to finance up to €24.5 billion for 2009-2010. In the end, the initial commitments were exceeded and more than €33 billion in crisis-related support for financial sectors in the region was made available.

The participating IFIs made joint assessments of large bank groups’ financing needs and deployed rapid assistance in a coordinated manner, according to each institution’s geographical and financing remit. Financing was complemented with efforts to coordinate national support packages and policy dialogue among key stakeholders in the region, in close cooperation with the International Monetary Fund (IMF), the European Commission, and key European institutions. The resources made available to the private sector under the Joint IFI Action Plan complemented those made available to the public sector by the IMF, the European Commission and IBRD, creating positive synergies between macroeconomic and micro/financial sector support and enhancing public confidence.

The Joint IFI Action Plan facilitated the management of the crisis within what emerged as a novel European private-public sector coordination platform. The “Vienna Initiative” has built upon this platform to bring together stakeholders from the public and private sectors to safeguard the financial stability of emerging Europe.

Final Report

Press Releases

At €33 Billion, EBRD, EIB, World Bank Group Crisis Response for Banks Tops Target (11 March 2011)

Joint IFI Action Plan, Joint IFI Action Plan-One Year On (1 March 2010)

IFI Initiative EBRD, EIB, and World Bank Group join forces to Support Central and Eastern Europe (27 February 2009)

Working Groups


Under the Vienna Initiative 1.0, Working Groups (WGs) were formed in order to analyse the following policy issues that would make financial sectors in emerging Europe more resilient in the longer term. WGs were compromised with representatives from parent banks, regulators, central banks, ministries of finance, European institutions and IFIs. To date, through the WGs, the Initiative has produced recommendations in a number of areas relevant to financial stability, market regulation and capital market development.

Working Group on Basel III Implementation in Emerging Europe

Basel III Working Group Final Report

Working Group on NPLs in Central, Eastern and Southeastern Europe

Working Group on Local Currency and Capital Market Development

Working Group on the Role of Commercial Banks in the Absorption of EU Funds

Press Releases