The FINANCIAL — Bank deleveraging in central, eastern and south-eastern Europe (CESEE) slowed in the second quarter this year but credit growth remains subdued, according to a new report from the Steering Committee of the Vienna Initative.
Banks reporting to the Bank for International Settlements (BIS) reduced their exposure to the region by 0.1 percent of GDP in the second quarter of 2014, a slowdown compared to the first quarter.
Excluding Russia and Turkey, the external positions of BIS reporting banks in the region declined by 0.4 percent of GDP, also a deceleration compared to the first quarter.
Overall net capital inflows to the region, excluding Russia, turned positive in the second quarter, reflecting strong portfolio flows after a negative dip in the first quarter, according to European Investment Bank.
However, credit growth through July 2014 remained subdued in the region outside Turkey and the Commonwealth of Independent States (CIS), with most of southeastern Europe still seeing a contraction, while credit growth slowed in Turkey and the CIS.
The Vienna Initiative’s bank-lending survey shows cross-border banks continuing to reassess their country strategies in the region.
The percentage of banks anticipating an expansion of operations in the longer term has declined relative to the March 2014 survey. All parent banks, however, intend to maintain the current level of capital exposure to their subsidiaries, or even increase it. The survey shows subsidiaries in CESEE reporting stabilization in supply conditions and an increase in demand for credit over the last six months, albeit at low levels.
Both demand and supply conditions for credit are expected to improve in the next six months, according to European Investment Bank.
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