Watch: Austrian Banks Told to Limit Lending to the East

Central and Eastern Europe – Austrian Banks Told to Limit Lending to the East – CNBC.

Austrian bank supervisors have instructed the country banks to limit future lending in their east European subsidiaries, a further sign of the potential knock-on effects of the euro zone crisis for economies around the world.

The restrictions come as Austrian officials seek to defend the country AAA credit rating, amid concerns that the government might have to bail out its banks because of losses in central and eastern Europe, where they are the biggest lenders, and their exposure to Italy.

The moves by Austria, which appear to be unilateral, show how even the euro zones strongest economies are feeling the pressure of the sovereign debt crisis.

Neighboring Hungary on Monday officially requested precautionary financial help from the International Monetary Fund and the European Union, confirming a U-turn after it shunned further IMF support 18 months ago.

The Austrian central bank said in a statement that Erste Group, Raiffeisen Bank International and Bank Austria, owned by UniCredit of Italy, would be prevented from loaning significantly more in CEE countries than what they raise in local deposits. Subsidiaries that are particularly exposed must ensure the ratio of new loans to local refinancing is not more than 110 percent.

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