All eyes on foreign gov’t moves

As the global crisis has a deepening impact on Southeastern Europe, Greek banks are concerned that governments in the region may be preparing to nationalize lenders in order to help prop up their financial systems. In countries such as Romania and Bulgaria, foreign banks control 90 percent of the banking system, leaving their governments without a state-controlled lender able to act on their behalf in helping money reach consumers and businesses. Foreign-based banks, including Greek lenders, have significantly reduced loan operations in Southeastern Europe in order to support their own financing needs back home. On top of this, government support plans prohibit banks from transferring capital abroad. Foreign lenders had been raising funds for foreign units via the interbank market, before transferring the money in local currency. Bank officials believe Southeast European countries may be considering the acquisition of local banks from foreign groups. This would provide them with an additional tool for meeting the present challenges, according to bank officials. Meanwhile, Bank of Greece Governor Giorgos Provopoulos said Greek banks should consider the risks carefully before lending to neighboring countries in Eastern Europe. Loans to Serbia, Hungary, Romania and Bulgaria entail greater risks, Provopoulos was quoted as saying. «If economic conditions in these countries were to significantly deteriorate, Greek banks might find themselves exposed not only to credit risk but also to exchange rate risk,» Provopoulos, who is also on the European Central Bank governing council, told The Financial Times. »I have advised the banks to be more prudent and to lend on the basis of availability of local funding, taking into careful consideration local economic conditions,» he said.

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