BankersAccuity, the global standard for payment efficiency and compliance solutions, today presented key trends facing the banking industry in Central and Eastern Europe (CEE) following their attendance at the recent 27th BACEE Regional Banking Conference in Budapest.
Discussing the outlook for European banks, the conference focused on the current macro-economic environment in CEE and the economies of Hungary, Serbia, Poland, Czech Republic, Slovakia and Russia in particular.
Despite signs of growth in the region, many foreign banks are considering leaving CEE due to perceived lack of opportunity, non- performing debt and money laundering risk. With this in mind a key challenge for local banks is to sustain attractive levels of profitability to remain competitive- especially prevalent with increased sovereign and corporate credit risk serving as a catalyst for banking fragmentation in the region.
Counterparty credit risk is a major issue in CEE and following a panel discussion by BankersAccuity on Correspondent Banking KYC Best Practice, it was apparent that there are concerns over inadequate due diligence systems currently in place. Local financial institutions need to implement robust correspondent banking, KYC and credit risk analysis in order to overcome the challenge of accurately assessing and trusting the stated asset values of correspondent and investment banking partners in particular.
Like many economies in Europe, the CEE countries are facing increasing regulatory pressure with Basel III increasing capital requirements for local banks. The newly announced Capital Requirements Directive (CRD-4) adopted by the European Parliament, will only add to the burden requiring organizations to hold sufficient capital to cover losses of investments and honour loans and customer withdrawals. Banks in CEE feel squeezed, balancing regulator demands with market expectation to perform and it comes as no surprise that 62% of delegates felt that increased regulation will make banking less competitive.
“Mirroring the challenges faced by other emerging market economies, local banks in CEE are receiving conflicting recommendations from the regulators and the markets,” commented Guy Sheppard, Senior Product Manager at BankersAccuity. “Regulators require them to increase their capital requirements to make them safer meanwhile shareholders are focused on increasing profitability or face disinvestment. At BankersAccuity, we’re striving to assist CEE economies in applying globally recognized due diligence processes to reduce their exposure to credit risk and encourage growth in the region.”
Recommending BankersAccuity as a comprehensive KYC reference source for the international banking community, Istvan Lengyel, Executive Secretary at BACEE commented “BACEE uses all the BankersAccuity due diligence products including BA.com, the Due Diligence Repository and Credit Risk and we find them to be extremely useful.”
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