Austrian banks' subsidiaries in Romania will not receive support from their main shareholders unless they grow sustainable, local financing through local deposits, local issuance activity and supranational funding, the Austrian Financial Market Authority (FMA) and the Austrian National Bank have decided.

This decision affects Erste Group, the main shareholder in local lender BCR, Raiffeisen Bank International, shareholder of Raiffeisen Bank Romania and UniCredit Bank Austria, which controls UniCredit Tiriac Bank in Romania. These banks will basically have to find means of refinancing from the Romanian market and make sure the ratio of new loans to local refinancing stays under 110 percent. All three banks currently have a loans-to-deposits ratio exceeding 110 percent.

“Credit growth will in the future be conditional on the growth of sustainable local refinancing (comprising mainly local deposits, but also local issuance activity and supranational funding, e.g. by the EBRD or the EIB).In the future, subsidiaries that are particularly exposed must ensure that the ratio of new loans to local refinancing (i.e. the loan-to-deposit ratio including local refinancing) does not exceed 110 percent,” according to a statement from the Austrian National Bank.

Moreover, banks will have to draw up living wills and resolution schemes to hedge for potential crisis situations.

The set of rules also includes implementing the Basel III rules at the beginning of 2013- the participation capital subscribed under the bank support package will be included in the capital base, while from 2016, banks will be obligated to hold an additional common equity tier 1 ratio of up to 3 percent, depending on the risk inherent in the respective business model.

“This set of measures will provide a sustainable growth model both to the CESEE economies and to the banks active in the region, irrespective of pronounced boom-bust cycles. Not only will the measures benefit the stability of the local financial markets, but Austria’s exposure to this region will also become more sustainable,” said Austrian Bank Governor Governor Ewald Nowotny.

BCR is the largest bank in Romania by assets, with a 20.5 percent market share. Raiffeisen has a market share of 6.5 percent, while UniCredit Tiriac Bank, of 5.8 percent based on their assets mid-2011.

The official statement from the Austrian Central Bank here.

Corina Saceanu, corina@romania-insider.com