Last week, at the invitation of the European Bank for Reconstruction and Development (EBRD), leaders of banks and financial organizations in the European region met in London to discuss lessons learned,
Useful for the financial sector in the region.
The meeting took place behind closed doors and we learned the essence of the Financial Times briefing. The introduction of restrictions on foreign currency lending, previously considered, is now discouraged: instead, they emphasize the importance of self-regulation and local currency lending, and experts say it is not time to introduce fundamentally new regulation and supervision.
Problems have to be solved
In both Western and Eastern Europe: in the West, the tightening of borrowing criteria (eg in Great Britain), in the East, the regulation and tightening of foreign currency lending (see Simor-MNB proposals). Most of the EU countries have more than half of their foreign currency loans (Austrian loans are also foreign currency loans), the ratio is the highest in the Baltic states, but Hungary is a leader in this indicator. Commodity credit is the most widely available consumer loan available in all major retail chains. These loans are typically used to buy commodities, and the advantage of being able to obtain a lower income is that it can often be used at 0% interest and APR.
In Western Europe, the regional currencies have weakened due to the crisis, and foreign currency lending has become a risk factor here, while unemployment to the east has become a risk factor for borrowers.
Professionals underlined that the region should continue to rely on foreign currency lending, but that risks should be reduced, which can best be achieved through self-regulation rather than top-down economic tightening. For example, in countries preparing for the introduction of the euro, it would be counterproductive not only to “ban” euro-based credit but also to tighten them significantly.