November 24, 2011 / 8:58 AM / in 6 years

Austria bank move not fair play - Romania president

3 Min Read

* Basescu says Austrian lending rules are not fair play

* Impact of decision may have been misunderstood

By Luiza Ilie

BUCHAREST, Nov 24 (Reuters) - Romania's President Traian Basescu said on Thursday he was concerned about new Austrian rules to limit lending in central and eastern Europe, which he said were not fair play and would expose its financial system.

Rules proposed by Austrian regulators this week link bank lending to the amount of refinancing that lenders can arrange for themselves locally in central, eastern and southeastern Europe.

Three Austrian banks with big businesses in emerging Europe need an extra capital buffer by 2016 and must meet the Basel III banking industry capital rules six years ahead of schedule to boost the safety of the financial system, regulators said.

Basescu's comments reflect growing concern across central and eastern Europe of a steady withdrawal of funds by western-owned banks that could cripple growth in the region's emerging economies.

"I would like to express my concerns. I would like to think that the Bank of Austria's announcement over a reduction of capital inflows ... was either a mistake or a misunderstanding of its impact," Basescu said at a seminar.

"You have made huge profits and if you are now getting ready to leave Romania unfinanced during the crisis we will think it is an act lacking fair play towards Romania."

"I don't want to believe we will be left to pay the bills of banks' greed," Basescu said.

"There are European mechanisms. I urge you to use these mechanisms instead of choking the Romanian economy by reducing capital inflows."

The requirement covers Italian group UniCredit's Bank Austria unit, Erste Group Bank and Raiffeisen Bank International, which officials said had all accepted the guidelines and would continue to operate in the region.

"Erste, with more than 7.5 billion euros here in exposure will continue to support its subsidiary here, no question about that," said Dominic Bruynseels, chief executive of Erste's Romanian unit BCR.

"Banks' exposure in retail will probably reduce over the next 12 months. Only when we will see jobs, more stability ... then confidence will return in lending." (Writing by Sam Cage; editing by Patrick Graham)

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