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UPDATE 1-Top foreign banks say to maintain Serbia exposure

Published 03/27/2009, 11:57 AM
Updated 03/27/2009, 12:00 PM
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* 10 biggest foreign bank owners pledge support

* Statement after IMF-chaired meeting in Vienna

* Similar to IMF-sponsored Romania statement

(Adds additional details and quotes)

BELGRADE, March 27 (Reuters) - The western European lenders that own the 10 biggest Serbian banks committed on Friday not to cut their exposure to Serbia and said they supported the deal struck between that nation and the IMF this week.

In a statement similar to one issued by the owners of Romania's top banks late on Thursday, the banks said they would work with the International Monetary Fund (IMF) in the coming months to determine the capital needs of their subsidiaries.

"We are aware that it is in our mutual interest and in the interest of Serbia that we jointly commit to maintaining the overall level of exposure to Serbia," the banks said in a joint statement after an IMF-chaired meeting in Vienna.

"We agreed that in the course of the coming weeks we will work to define concrete measures on maintaining our exposure in Serbia," the statement said. Serbia's central bank governor Radovan Jelasic also took part in the meeting.

Jelasic had sought to get the banks, which dominate the Serbian market, to maintain their lending in 2009 and 2010.

The agreement with the lenders is seen as vital to preserve macro-economic stability and the sustainability in the medium term of the country's balance of payments.

The IMF agreed with Serbia on Wednesday to provide a 3 billion euro ($4.1 billion) loan through April 2011 to back the Balkan nation in enforcing its toughest spending cuts in years.

Under the programme, Serbia committed to 1 billion euros worth of spending cuts, equivalent to 3 percent of GDP.

"We firmly stand behind economic reforms in Serbia envisioned by the IMF arrangement," the banks' statement said.

"We also note that within the Serbian government program supported by the IMF stress tests will be conducted in accordance with IMF methodology to check bank resilience in case of deterioration of external conditions and domestic demand in the coming months," they said.

However, the statement did not include an explicit pledge to provide additional capital to the subsidiaries, as the Romanian statement did.

The banks which signed the statement were: Intesa Sanpaolo, Raiffeisen International, BayernLB's Hypo Group Alpe Adria, Eurobank EFG, National Bank of Greece, Unicredit, Societe Generale, Alpha Bank, Volksbank International and Piraeus Bank.

Independent analysts see Serbia's GDP contracting by up to 5 percent in 2009 -- sharply lower than forecasts just a few months ago -- following years of average 6.7 percent growth. (Reporting by Adam Tanner; Additional reporting by Boris Groendahl, Editing by Andrew Macdonald)

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