Are you sure?

World Bank talks to banks over east Europe – report

  The World Bank is talking to banks involved in eastern Europe to persuade them to hold on to their investments there, the institution’s president Robert Zoellick told Italy’s Corriere della Sera newspaper.

“We are certainly (talking directly to banks),” Zoellick said in the interview conducted in Brussels and published on Sunday.

“We, the European Bank for Reconstruction and Development (EBRD), the European Investment Bank (EIB) and governments are all ... working with the institutions to ensure that they don’t pull funds from that part of Europe,” he said.

Many western European banks invested in central and eastern Europe (CEE) as a key growth driver before the global financial crisis hit. Now there are concerns that, with the area facing severe economic recession, bad debt will rise and currencies fall, hurting those investments.

That may prompt Western banks, which are themselves feeling the pinch of the global recession and struggling to boost their capital ratios, to pull back on business in the region.

Zoellick said it would be damaging if it were true that there was pressure for Western banks to repatriate funds. “I encourage the economy ministers and the European Commission to work with us and with the chief executives,” Zoellick said. The banks “know that if they pull out the investment, they will have to make writedowns and accept losses,” he added.

Zoellick said he was in touch with the Italian government and Italian banks. Italian bank UniCredit is the biggest lender in central and eastern Europe and its larger domestic rival, Intesa Sanpaolo, also has many investments in the region. (Reuters)