It has been a confusing summer for observers of central and eastern European banking. Barely a week has gone by without a new spate of headlines pointing to the risks surrounding a potential pullback by western European banks from the region. However, the messages have been at best mixed and at worst contradictory.
At one end of the spectrum are the European Bank for Reconstruction and Development and its fellow members of the Vienna 2.0 initiative, designed to help maintain foreign banks’ exposure to central Europe. In their first quarterly Deleveraging monitor, published in late July, they insisted that not only had "worrisome" levels of deleveraging already taken place but that the prospect of further withdrawals of funding from the region "remains a headwind and a potential threat to external and financial stability".
On the other side, bankers in the region – from chief executives to analysts – have queued up to assert, variously, that there has been no deleveraging to date, that if there has been deleveraging it has been healthy and even desirable, and that any future deleveraging is either unlikely or no cause for concern.
So who is right and, more pertinently, how and why have such divergent views become current?
Looking first at the question of whether or not deleveraging has already happened, the answer is that – perhaps inevitably – the available data can be interpreted to support either argument.
