By Boris Groendahl
VIENNA, Feb 27 (Reuters) - Austrian banks could withstand
worst-case loss scenarios in emerging Europe by using existing
capital cushions and drawing on the government's bank rescue
package, the Austrian central bank said.
The central bank, in a briefing late on Thursday, cited
analysts' loss estimates for Austrian banks in credit crunch-hit
emerging Europe of up to 31 billion euros ($39 billion), calling
the forecasts "extreme" yet manageable.
"Even those scenarios are manageable," said a senior bank
official said, adding losses could be covered with future
profit, existing excess capital and by drawing on the 15 billion
euros Austria has set aside for bank capital injections.
The central bank also said the top five Austrian banks had
increased funding of their emerging European units in 2008, and
were planning to keep funding levels at least stable this year,
enabling the units to continue lending.
Austria's central bank helps supervise the three biggest
lenders in emerging Europe -- UniCredit <CRDI.MI>, which manages
most of its assets through its Bank Austria unit, Raiffeisen
International <RIBH.VI>, and Erste Group Bank <ERST.VI>.
In total, Austrian banks have lent $270 billion to clients
in emerging Europe, fuelling the region's credit-funded boom as
export-heavy companies expanded and consumers borrowed to buy
houses, cars, stereos and refrigerators.
Investors loved the banks' stellar growth rates during the
boom. But as the global financial crisis spread, the love story
went sour and the exposure is now seen as a risk not only for
banks but also for Austria and even the European Union.
A report by ratings agency Moody's last week triggered a
broad sell-off of emerging European assets -- currencies,
government bonds and shares in exposed companies -- and also
drove Austrian government debt spreads to record highs.
The central bank joined other Austrian authorities in their
effort to quell the meltdown talk by highlighting the huge
differences between countries in the region.
It said it was not justified to take the most precarious
countries -- Ukraine, Romania and the Baltics -- as being
typical of the entire region, when bigger economies such as
Poland and the Czech Republic did not display the same
weaknesses.
Austrian banks' exposure was spread widely between emerging
European countries -- unlike Sweden's, which is concentrated in
the Baltics, or Greece's, focused on the Balkans -- and 72
percent of it was to EU member states, the central bank said.
The loss scenarios it referred to had been drawn up by:
Goldman Sachs analysts, whose worst case loss forecasts range
from 5-26 billion euros; by Danske Bank, which sees 10-31
billion; and by the European Bank for Reconstruction and
Development, which puts them at 15-20 billion.
The central bank said it had also done internal stress tests
leading to worst-case loss estimates for the Austrian banking
sector but declined to say how they compared to the analysts'
estimates it cited.
(Reporting by Boris Groendahl; Editing by Dan Lalor)
($1 = 0.7853 euro)
