IT SOUNDED like the jaded complaint of an "Occupy Wall Street" protester: banks are greedy, they gambled with risky loans and now they are holding their hat out again. Only this time the remarks came from a president.

Last week Austrian regulators ordered three of the country's major banks to limit cross-border loans to eastern Europe in order to meet European Union capital requirements. Traian Basescu, Romania's president, didn't like what he heard. "The announcement... was either a mistake or a lack of understanding when it comes to its effects", he said at an Economist conference in Bucharest last week.

He went on to remind his "European friends" that Austrian banks had made "huge profits" in Romania. "I wouldn't want to see us, countries that joined the EU later, paying the bill for banks' greed, imprudence and irresponsibility", he thundered, warning banks not to "choke" the Romanian economy. Over 30% of Romania's banking sector is in Austrian hands. 22% is Greek-owned, and Portuguese, Italian and French banks are also present in the country.

Central bankers at the Economist conference argued that the system is still solid, and that the risk that subsidiaries could fall bankrupt and need renationalisation is "zero". Even if parent banks are restricting capital flows, Romania remains attractive compared to other countries in the region, said Cristian Popa, a vice-governor of Romania's central bank.



But there are real risks to eastern Europe of serious spillover effects from the euro-zone crisis. In a recent analysis Erik Berglof, chief economist of the European Bank for Reconstruction and Development, warns of the possible effects on banks' foreign subsidiaries.

"[T]he capacity of Western European governments to backstop banking systems is clearly reaching its limits," he writes. "Allowing foreign banks' subsidiaries to become orphaned amid a worsening crisis in home countries would undermine confidence in emerging Europe's financial systems."

A month ago, in Brussels, Mr Basescu thought that he had secured stricter requirements for banks not to drain capital from their subsidiaries when EU leaders sealed a deal on bank recapitalisation. But it turns out to be non-binding. And with the Austrian bank Erste reporting €726 million losses in Romania and Raiffeisen Bank flip-flopping on a possible pull-out from the region, the president's fears do not seem that far-fetched.