We analyse the emergence of the Vienna Initiative (VI) as a public-private partnership in the wake of the global financial crisis and its short-term impact on risk metrics of Western European banks and individual countries. We find that adverse herding behaviour toward banks provides an explanation for banks' (non-)participation in the initiative. The VI measures were successful in mitigating adverse herding behaviour, underscoring their strong signalling effect on investor sentiment. Additionally, they attenuated financial market stress in those Central, Eastern and South-eastern European economies that were addressed by the VI, while having only minor adverse spillovers to those that were not.