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Statement June 11, 2020

Vienna Initiative Full Forum 2020

Full Forum Meeting of the Vienna Initiative – 8 June 2020

Members of the Vienna Initiative met in virtual session on June 8th, their first opportunity to sit in Full Forum since the outbreak of the coronavirus, which has had a severe impact across the economies of Central, Eastern and Southeastern Europe (CESEE).

The Vienna Initiative brings together key private and public stakeholders in the financial sector active in CESEE, providing a platform for dialogue and voluntary cooperation that is particularly important at this time of economic crisis.

Chaired by the Governor of the Croatian Central Bank, Boris Vujčić, the session heard presentations from key participants, reflecting on the economic and policy challenges presented by the coronavirus pandemic and the role of the Vienna Initiative in the new crisis. The participants agreed that, as in 2008/9, the initiative should continue to play its role in establishing dialogue between cross-border financial institutions, regulators and international financial institutions with a view to mitigating the impact of the crisis on the emerging European economies.

The International Monetary Fund (IMF) is forecasting a deep recession in the region, with extreme uncertainty about its depth and duration. While the IMF supports a strong policy response to the COVID-19 pandemic, including in the region engaged in the Vienna Initiative, it has noted that emerging European economies, although less affected by the crisis so far, had less policy space available than advanced countries.

Vienna Initiative participants, including the multilateral development banks and institutions of the European Union, outlined their own responses to the crisis.

The European Commission provided an overview of the main measures adopted and recommended to mitigate the consequences of the COVID-19 crisis. These measures include the “general escape clause” allowing for exceptional fiscal support for companies, households and health sectors, increased flexibility in applying banking regulation (new banking package adopted in April), the relaxation of state-aid rules, as well as support to labour markets through the provision of EU funds for short-time worker schemes (SURE). The recovery of the economy will also be supported by the proposed new EU budget and the €750 billion Recovery Instrument.

The European Bank for Reconstruction and Development (EBRD) outlined its Solidarity Package, which envisages dedicating the entirety of activities in 2020/21 to the crisis, with financing of some €21 billion and a programme for providing short-term liquidity to clients that has already been increased to €4 billion from €1 billion. The Bank has increased very significantly its support of cross-border trade flows through its flagship Trade Facilitation Programme and established a Rapid Advisory Response facility to help support crisis-related policy activities in the countries of operations.

Over the next 15 months, the World Bank Group will be providing up to $160 billion in financing tailored to the health, economic and social shocks countries are facing, with a portion of the financing to support countries of the Vienna Initiative. The World Bank Group has already committed more than $1.75 billion to help governments and the private sector in Europe and Central Asia mitigate the impacts of COVID-19. World Bank representatives also presented guidelines on design of borrower relief measures.

“Our immediate focus is on helping countries address the health and economic impacts of the COVID-19 pandemic - to save lives and livelihoods - with fast track financing and policy tools,” said Anna Bjerde, World Bank Vice President for Europe and Central Asia. “In the medium-term, we will help countries rebuild and recover from the economic and fiscal fallout from the crisis through appropriate policy measures and financing.”

In May, the European Investment Bank (EIB) launched a Pan-European Guarantee fund of €25 billion to scale up its support to the real economy, with a focus on smaller and medium-sized companies, with the aim of mobilising up to €200 billion. In addition, the EIB is launching a financing envelope of €1.7 billion dedicated to the Western Balkans. The EIB also has a pipeline of €6 billion worth of healthcare and research and development projects, which will support planned investments in critical health infrastructure and equipment, and R&D towards a vaccine and a cure.

Representatives of the cross-border commercial banks active in the region expressed their commitment to the region. They welcomed the various relief measures adopted by the home and host countries, while emphasising the importance of efficient capital and liquidity management and avoidance of ring-fencing measures. They invited further dialogue with the international financial institutions on financial products needed in this crisis, with particular emphasis on risk-sharing instruments.

Andrea Enria, Chairman of the Supervisory Board of the European Central Bank, pointed out a much stronger position of banks, both in terms of capital and liquidity, relative to the previous crisis (GFC). Banks have increased lending in Q1, while lending standards have tightened less than during the GFC. Although some capital buffers were temporarily released, so far banks have not taken advantage of this, with provisioning levels somewhat different across banks.

In the wake of the coronavirus crisis, participants reflected on the possibility of expanding the Vienna Initiative to other countries in the European neighbourhood, but also of engaging with new financial sector stakeholders. They agreed to invite several countries with strong links with the European Union to join the initiative, and to engage in policy dialogue with other countries in the EU vicinity.

The present crisis has highlighted the important role played by institutional investors in the capital markets, as they have become more active and influential in emerging market financing since 2008/9 when the initiative was established. Participants agreed to invite relevant institutional investors and investment banks active in the region in order to engage in an open dialogue to jointly reflect on the evolution of cross-border bank and portfolio flows. The planned engagement will also explore potential voluntary approaches that could help make capital flows to emerging markets less pro-cyclical in the future and create incentives to mitigate their volatility.

The forum participants agreed to continue their involvement in the on-going work of the Vienna Initiative that was launched before the pandemic, including efforts to identify mechanisms to support innovation, greening of the financial systems and resolution of non-performing loans. The participants supported the earlier decision of the Steering Committee to establish a working group to foster a constructive dialogue between commercial banks operating in CESEE and the various international financial institutions with respect to the market needs and characteristics of the instruments aiming at supporting business during and after the COVID-19 pandemic.


The Vienna Initiative was created at the height of the 2008/09 global financial crisis, bringing together international financial institutions (IFIs), European institutions, regulatory authorities from host and home countries alike, and major cross-border banking groups active in CESEE. Its initial aim was to shore up the financial sector in emerging Europe, prevent disorderly deleveraging and to maintain a flow of credit to the economies of the region. These aims were successfully achieved at that time.

As the region recovered, the activities of the Vienna Initiative shifted to addressing the remaining and new challenges in the financial industry, including the resolution of non-performing loans (NPLs) and the development of local capital markets in the emerging European economies.