EBRD: Erste deal could create better environment for banks

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The deal the Hungarian state, the European Bank for Reconstruction and Development (EBRD) and Erste announced yesterday could contribute to a "stable and predictable" environment for the banking sector in Hungary, EBRD President Suma Chakrabarti told Hungarian news agency MTI.

Although some of the measures introduced by the Hungarian government in recent years have raised concerns, Chakrabarti (pictured) said he believes that yesterday’s agreement represents "an important step" in improving the relationship between banks and Hungarian authorities, a relationship he said has become "quite difficult".

Concerning EBRD's motivation to participate in the deal, Chakrabarti said it was important for Hungary's banking sector "to retain the presence of strong private players" such as Erste "to ensure fair and transparent competition", MTI added. The investment in Erste may contribute to the future consolidation of Hungary's banking sector and boost lending to the private sector, the president said, adding that the latter objective was in line with the Hungarian central bank's Funding for Growth program.

Asked if boosting lending in Hungary would not run counter to the general trend of EBRD progressively re-allocating its resources to its less advanced non-EU partners, Chakrabarti noted that the EBRD had "responded strongly to the financial crisis and its aftermath by acting swiftly, decisively and pragmatically where our investments are needed most."

The bank's board of governors adopted directives "focused on strengthening resilience, promoting integration and support addressing global and regional challenges" at its annual meeting last year. Under those principles, EBRD hopes to step up its activities in Hungary "if the policy environment improves", he added.

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