Johann Strobl, CEO of Raiffeisen Bank International
Governments asking for banks’ help in deploying Covid-19 rescue packages must be open with the public about what the process involves and the need for oversight, the chief executive of Raiffeisen Bank International tells Euromoney.
Johann Strobl highlights the question of liquidity support for small businesses hit by lockdown and the economic slowdown. Politicians across the Austrian group’s 14-country central and eastern Europe (CEE) network have announced plans to back facilities issued by banks. Most, however, have shied away from full state guarantees.
“They want banks to invest 10% or more of their own money because they need banks’ selection capabilities,” says Strobl. “I hope they will be fair enough not to take advantage of that selection process and then blame the banks for doing it.
“They also need to make it clear to the public that the money – which will largely come from taxpayers – will not be available without any checks.”
As Strobl notes, the challenge for both banks and politicians is that, as the Covid-19 crisis deepens, expectations are running high.
“Once governments announce support packages, customers want to see the money on their account the next day,” he says.
Disappointments and delays
This raises the question of who will be held responsible for the inevitable disappointments and delays. Strobl fears it will once again be the banks.
“Since the financial crisis, it has been easy to blame banks for everything,” he says. “Everyone is aware that there is a risk that this behaviour might return at a time when there are high expectations that banks will provide easy access to money.”
For this reason, RBI has been closely monitoring and investigating complaints about access to funding.
Strobl says most turn out to be from customers who would have struggled to get new finance even before the start of the crisis.
“Unfortunately, their voices often get broad public attention,” he adds.
Since the financial crisis, it has been easy to blame banks for everything- Johann Strobl, RBI
He is keen to stress, however, that RBI is actively helping clients with the disruptions caused by Covid-19.
“We are talking to all our customers and supporting them in everything from credit prolongations and adjustments to advice on support programmes and how to write applications,” he says.
The Austrian group was quick to offer payment holidays to customers as the crisis gained momentum in March, in most cases well ahead of the imposition of official moratoriums in countries such as Hungary, Romania and Serbia.
“We have from the beginning supported debt payment moratoriums,” says Strobl. “In a situation where you have a sudden lockdown and a sharp drop in economic activity it is an appropriate way to remove uncertainty and ease the fears of borrowers.”
He notes that, while many retail customers have taken advantage of moratoriums, RBI has also seen a lot of demand from clients who want to continue servicing their debt.
Serbia's head office
On the corporate side, after an initial hiatus of a couple of weeks while firms focused on adjusting their operations after lockdown, Strobl says most have come back to the banks to discuss their liquidity needs.
Here RBI, like other lenders, has seen a big difference between smaller and larger players.
“Small businesses who rely heavily on revenues and feel pressure on working capital need immediate help,” says Strobl.
“Most larger corporates these days have a nice liquidity buffer, but of course they face the same uncertainty as everyone else and so they are drawing on committed lines or asking for additional support.”
Our main responsibility is to support our customers by giving them access to the money they need and doing it in a quick and safe manner- Johann Strobl
For Strobl, who has led RBI since March 2017, providing credit to the economy is the core function of banks during the current crisis, along with ensuring a ready supply of cash.
“Our main responsibility is to support our customers by giving them access to the money they need and doing it in a quick and safe manner,” he says.
If banks get it right, he adds, they can reap the benefits in the form of renewed confidence in the sector – “another wave of trust in banks.”
Combined with a surge in uptake of digital banking services since the start of the crisis, particularly in previously cash-dependent regions such as the Balkans, Strobl believes this could help traditional banks fend off the challenge from fintechs and other new market players.
“The increase in use of digital channels is very positive,” he says. “If customers realize our digital offering is very good, they won’t feel the need to move to non-banks.”
In CEE, another area where banks may be able to help with the Covid-19 response is in channelling support from international financial institutions to the region.
Entities including the European Bank for Reconstruction and Development and the European Investment Bank are keen to support the real economy in CEE but need the assistance of commercial banks to reach the private sector and, in particular, the vulnerable small and medium-sized enterprise segment.
Regional banks, including RBI, already have long-standing relationships with these IFIs, both bilaterally and as part of the Vienna Initiative.
Set up in 2009 to prevent a mass withdrawal from CEE by Western banks following the financial crisis, the Vienna Initiative has also proved a useful platform for coordinating efforts to reduce non-performing loans across the region over the last decade.
A number of stakeholders, including the IFIs and leading regional banks such as RBI, want to see it repurposed to tackle the Covid-19 crisis.
“Funds have been allocated by the IFIs, but deploying them quickly will require a coordinated approach,” says Strobl. “Here we can make use of the relationships and trust that have been built between these institutions and the banks in the region.
“There will also be many more topics on the agenda over the coming months, so it’s good to revive the Vienna Initiative as a forum for cooperation.”
A ban on dividends has popular appeal but doesn’t take account of the fact that many shareholders, such as pension funds, depend on dividends- Johann Strobl
So far, details of how a revived Vienna Initiative might work are scarce. It is clear, however, that one thing banks are hoping for is a rethink on dividend payments, something various national regulators in CEE have moved to restrict.
Strobl has joined other regional bank chiefs in calling for this to be reversed.
“Banks in the EU have built their operations on the promise that as long as capital stays within a banking group, it should be free to move,” he says. “The ring-fencing we are now seeing by local governments puts a lot of pressure on parent groups and will be damaging in the long run.
“Shareholders, whether in CEE or Western Europe, need some compensation for the money they have invested. A ban on dividends has popular appeal but doesn’t take account of the fact that many shareholders, such as pension funds, depend on dividends.”