E.Europe regulators lash out at regional pessimism

By Michael Winfrey and Gareth Jones

PRAGUE/WARSAW (Reuters) - East European banking supervisors complained on Wednesday about negative press over their financial sectors, while the region's biggest foreign lender said its situation was "much better" than has been suggested.

Currencies and stocks in the EU's eastern wing were battered as long-building concerns over banks, growth and external financing reached the front pages of mainstream western media last month, including references to it as "the sub-prime of Europe."

Policymakers have tried to fight that with public statements and policy moves, and Polish, Czech, Romanian, Bulgarian and Slovak bank supervisors on Wednesday decried "publicly announced initiatives" about banks' exposure to central and Eastern Europe, which they said undermined efforts to uphold stability.

"The published information... are often oversimplified and misleading, and it can have a negative impact on banks that are operating in these countries," the supervisory authorities said in a statement published on the Slovak central bank's website.

"Such self-fulfilling speculation totally disregards fundamental economic developments in the CEE countries and creates misperceptions that could inevitably be detrimental to both the CEE region and Europe as a whole."

Analysts, who note the once-booming region is facing at best a sharp slowdown in growth, were unimpressed and said the statement would do little to calm market nerves.

Hungary, long the region's sick-man, also said later that it had signed the statement, but only after markets punished the forint currency, which fell 1.25 percent to a lifetime low against the euro.

The Polish zloty and Czech crown were roughly stable and some analysts said that could be a first sign that investors were starting to favor the region's stronger economies over those which look more vulnerable to a credit squeeze.