Fitch: Main risk from euro-zone crisis is no funding for CEE bank subsidiaries
2012-05-29 17:39:30
Foreign ownership of local banks has been a rating strength in Central and Eastern European (CEE) countries, as foreign-parent banks supported their CEE subsidiaries prior to and through the financial crisis in 2008, according to a report by Fitch Ratings.
The recent financial volatility in the euro-zone, though, raises the risk that the banks may now be less able to help and that contagion could spread to CEE banks.
Fitch's view is that the biggest risk for CEE banks from the euro-zone crisis is a reduction in funding availability for CEE subsidiaries, which could force them to become increasingly self-sufficient.
Although these subsidiaries would be able to sustain some reduction in funding, they could be forced to cut credit provision and shrink their balance sheets, with an adverse effect on GDP. Fitch expects that parent banks are highly unlikely to engage in a disorderly exit from the CEE region, or to withdraw funding on a scale and at a pace that would require rapid deleveraging of subsidiaries' operations, it concluded.