Vienna, Austria, February 20, 2012
—The World Bank Group at a workshop in Vienna last week brought together policy makers, experts, bankers and regulators from across Eastern Europe and Central Asia to address debt recovery and business insolvency in the region in an effort to increase access to finance for businesses and encourage economic growth.
The deep recession that followed the global financial crisis in many countries in Eastern Europe and Central Asia has led to a significant increase in loan defaults. With a legacy of high levels of non-performing loans plaguing their balance sheets, and regulatory obstacles to resolving them, banks are not able to free up resources to resume lending, which limits access to finance for businesses and individuals and hinders economic growth.
“Each year, weak loan recovery and cumbersome insolvency mechanisms destroy hundreds of billions of euro in business value,” said Janamitra Devan, World Bank-IFC Vice President for Financial and Private Sector Development. “Effective debt resolution is critical to preserve, wherever possible, the economic fabric and jobs in the countries affected by the crisis.”
The workshop in Vienna followed an announcement in January that the World Bank Group will make $27 billion in funding available over the next two years for emerging economies of Europe and Central Asia affected by the Eurozone crisis. This workshop is one way the World Bank Group brings international expertise and practical advice to markets and our client countries to address this issue in the context of the Eurozone crisis.
The workshop emphasized that the role of governments is to establish an environment conducive for effective, market-led debt resolution. Despite significant reforms, in many countries of the region there remain severe legal and regulatory obstacles to effective loan renegotiation and restructuring.
Participants focused on topics such as using workout solutions outside of traditional court mechanisms, and using alternative dispute resolution to improve the recovery of loans. The more than 110 people attending also discussed how to improve taxation and insolvency regimes to ease loan restructuring and how to educate smaller firms and individuals facing possible defaults.
Government officials and private sector representatives from 24 Eastern European and Central Asian countries, ranging from Albania in the south to Latvia in the north, and from Poland in the west to Tajikistan in the east, participated in the workshop and led peer-to-peer discussions on challenges and solutions they have experienced in their home countries. Other participants included senior representatives from the European Investment Bank, the European Bank for Reconstruction and Development, the United Nations Commission on International Trade Law, and the Swiss Economic Cooperation Organization.
The workshop was supported by the government of Austria and benefited from the participation of Austria’s Ministry of Finance, Kontrollbank of Austria, and the National Bank of Austria. The World Bank Group Investment Climate team on Debt Resolution and Business Exit, IFC Advisory Services in Europe and Central Asia, the World Bank Group Europe and Central Asia region, and the World Bank’s new Vienna-based Financial Sector Advisory Center organized the event.
About the World Bank Group
The World Bank Group is one of the world’s largest sources of funding and knowledge for developing countries. It comprises five closely associated institutions: the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA), which together form the World Bank; the International Finance Corporation (IFC); the Multilateral Investment Guarantee Agency (MIGA); and the International Centre for Settlement of Investment Disputes (ICSID). Each institution plays a distinct role in the mission to fight poverty and improve living standards for people in the developing world. For more information, please visit