Launched at the height of the global financial crisis, the Joint IFI Action Plan and the European Banking Coordination ‘Vienna’ Initiative (EBCI) provided a significant financial contribution to rescue packages in the Emerging Europe region, and a critical coordination mechanism for national reform programs and venue for policy dialogue among key stakeholders in the region. The unprecedented level of cooperation was a key contribution to restoring market confidence in Emerging European banking systems. It illustrated the important counter-cyclical role played by the International Financial Institutions (IFIs) during the financial crisis.
Joint IFI Action Plan
- The Joint IFI Action Plan, announced in February 2009 at the height of the global financial crisis, was sponsored by the World Bank Group – the International Bank for Reconstruction and Development (IBRD), International Finance Corporation (IFC), and the Multilateral Investment Guarantee Agency (MIGA); the European Bank for Reconstruction and Development (EBRD); and the European Investment Bank (EIB).
- This initiative aimed at providing EUR 24.5 billion in support of the financial sector in the region through credit lines, funding for recapitalization of banks, and development policy loans to support financial sector reforms. Total commitments under the Plan, which came to an end as scheduled in February 2011, reached EUR 33.2 billion.
- Of this total, the World Bank Group contributed EUR 9.6 billion – above the initial commitment under the plan of EUR 7.5 billion. This included EUR 5.2 billion from the IBRD, EUR 2.4 billion from the IFC, and EUR 2 billion from MIGA. The EBRD contributed EUR 8.1 billion and the EIB EUR 15.5 billion.
- A parallel initiative, known as the Vienna Initiative – also known as the European Banking Coordination ‘Vienna’ Initiative (EBCI) – came into existence in early 2009 as a venue for bringing together country authorities, official multilateral donors, and Western European banks with large exposures in Emerging Europe to discuss the economic programs being implemented by countries, with financial support from the International Monetary Fund (IMF), the European Commission (EC), the World Bank, and the EBRD.
- The Initiative aimed to prevent large-scale uncoordinated withdrawal of cross-border bank groups from Emerging Europe. It contributed to ensuring, through formal commitments, that Western European parent bank groups maintained their exposure to Emerging Europe (in particular, in Hungary, Latvia, Romania, Bosnia and Herzegovina, and Serbia) and recapitalized their subsidiaries as and where needed.
- The initiative also had a positive effect in countries that did not have IMF-supported programs, as it was used as a venue for discussions between private and official creditors, with the participation of country authorities and banking sector supervisors.
- The Vienna Initiative has now been expanded into a forum to discuss important banking sector issues in Emerging Europe and propose solutions to policy makers. Two committees were created in 2010 to work respectively on Local Currency Finance Development (chaired by the EBRD) and on Enhancing Absorption of EU Structural Funds in Emerging Europe (chaired by the EC and the World Bank). Both committees received support from the World Bank Group and have largely completed their work. Two new committees have been created in 2011 – one on how to deal with the large rise in Nonperforming Loans (NPLs) across Emerging Europe (chaired by the World Bank and the IMF) and the other on the challenges of implementing Basel III (chaired by the World Bank and the EBRD).