Agreement with Banks Limits Crisis in Emerging Europe

The European Bank Coordination Initiative rings few bells outside the world of international finance.

But this series of meetings, aimed at preventing foreign-owned banks from pulling out of emerging Europe, has played a vital role in helping avert a systemic crisis. So far, 15 parent banks have made specific rollover and recapitalization commitments in five countries—Bosnia, Hungary, Latvia, Romania, and Serbia—all of which have stabilization programs supported with funding from the IMF and, in some cases, the European Union.

In this interview, two of the key players, Erik Berglöf, chief economist at the European Bank for Reconstruction and Development (EBRD), and Anne-Marie Gulde, senior advisor in the IMF’s European Department, discuss the impact of the initiative, known informally as the 'Vienna Initiative' because of where the first meetings were held.