Foreign banks pledge support for units in Hungary

BRUSSELS, May 20 - Parent banks of the six largest foreign banks operating in Hungary pledged on Wednesday to support local subsidiaries to help them weather the financial crisis, the European Union's executive Commission said.

A statement issued after a coordination meeting in Brussels said the six banks had made a joint declaration to maintain their overall exposure to Hungary and ensure "prudent capitalization of their subsidiaries." The meeting was chaired jointly by the Commission and the International Monetary Fund,

The declaration was signed by the parent banks of the six largest foreign banks incorporated in Hungary: Bayerische Landesbank, Erste Group Bank AG, Intesa SanPaolo, KBC Group, Raiffeisen International Bank Holding and UniCredit Bank Austria AG.

"These commitments, along with the balance of payments support package of the EU, the IMF and the World Bank implemented since early November 2008, will help Hungary's banking system to weather the current crisis better, strengthen investor confidence, and return the economy to a robust growth path," the statement said.

Hungary is now receiving balance of payments support of nearly 20 billion euros ($27.27 billion) from the IMF, European Union and the World Bank.

The Commission said that the success of the macroeconomic reform program and medium term balance of payments sustainability depended significantly on the continued involvement of all banks operating in or with Hungary, including foreign-owned banks.

In some eastern and central European countries, foreign-owned banks have been left as the only source of loans since the global financial crisis led risk-averse investors to dump emerging market assets. ($1=0.7334 Euro)