Presentation of the EBRD Transition Report 2015-16: Rebalancing Finance

On January 28, 2016, the OeNB welcomed Ralph de Haas, Director of Research at the European Bank for Reconstruction and Development (EBRD) to present the main findings of the EBRD Transition Report 2015-16 – Rebalancing Finance.

Ralph de Haas highlighted that the economies where the EBRD operates are currently facing the challenge of rebalancing and strengthening their financial sector to boost economic growth and innovation.

Investment levels in many EBRD countries are stagnating. According to the EBRD, the investment gap is particularly high in CESEE EU Member States, the region which registered the highest inflow of foreign capital before the 2008–09 financial crisis.

The EBRD calls for a gradual and sustainable rebalancing of financial systems to pave the way for sustainable long-term growth, and recommends, inter alia:

• a shift from foreign currency to more local currency funding;
• a diversification of investment inflows: supplementing inflows from Western Europe with inflows from other regions of the world (e.g. from Asia and Latin America);
• a greater role for equity finance, given high debt levels across the region;
• more emphasis be put on private equity, a financing instrument rarely used in transition countries to date.

Prior to the global financial crisis, the transition region experienced an unsustainable credit boom fueled by a massive inflow of foreign capital. The crisis still has an impact on the transition region: Many countries have been left with high levels of nonperforming loans, and the deleveraging process has not yet come to an end. Furthermore, cross-border capital flows and foreign direct investment have not recovered yet. Credit growth has remained weak and in particular SMEs suffer from barriers impeding access to finance.

For further information, please read the EBRD Transition Report 2015-16