The banking sector in Romania, which includes 40 banks, finances the Romanian economy with a percent of about 92 % from total funding of the Romanian financial system. The banking system has proven resilient during the crisis, continuing to provide financing of the Romanian economy.
Romania is an attractive destination for investors in the banking system due to the growth prospects of attracting European funds, financial intermediation, that represent about 40% and banking intermediation with 57 % .
Bank assets amounted to 83 billion euros in 2012, with a share in GDP of 62%. Romanian banking sector at the end of 2012 include two banks owned integral or in majority by the state, three private institutions with integral Romanian capital, 26 banks with majority of foreign capital, eight branches of foreign banks and one credit co-operative organization.
Institutions with foreign capital share of assets in total assets of the Romanian banking system rose from 83 % in December 2011 to 89.8% in December 2012. In terms of the origin of the shareholders, banks with Austrian holding a market share a percent of 37.7%, followed by French banks with 13.6 % and Greece bank institutions with 12.2%.
Financial intermediation, calculated as the share of government credit in GDP was 38.4 in 2012, similar to the value recorded in 2008, before the crisis, down compared to the maximum level of 40.1% recorded in 2011.
Moreover, the main challenges in the financial stability are credit risk, especially the lending foreign currency risk, and the risk of a disorderly development of external financing. In Romania, the recommendations of the European Systemic Risk Board by all EU authorities on foreign currency lending were extended to companies.
The expectations regarding general economic situation, the adoption by the central bank of prudential regulations to limit the growth of foreign currency lending and maintaining the high level of indebtedness of certain categories of borrowers contributed to restricting the non-government loans by 3.5 % in 2012, compared to end of 2011.
Banks in Romania have shifted from rapid expansion to a determined strategy of prudence proceeding by adapting the network and the number of employees. The number of banks was approximately 5,700 at the end of December 2012, while the number of employees in the system was adjusted to 61.700.
Rising unemployment, a significant reduction of wages and restriction or cessation of companies have contributed to the continuing decline of the repayment ability, with direct consequences on the quality of the loan portfolio of banks which led to an increase in the provisions adopted by the credit institutions.
Losses in the banking system have been driven by increased provisioning effort (as the coverage of non-performing loans ratio reached 18.2%) and by the reduction in net interest income.
Commitment to shareholders of credit institutions assured keeping the capital adequacy in comfortable levels. Romanian banking system still has substantial reserves of capital, solvency indicator placing it at 14.9%. This calculation includes the effects of prudential filters.
The solvency ratio in Romania is higher than the prudential threshold of 10% recommended by the National Bank of Romania (NBR) at the beginning of the period when the global crisis was propagated. According to the NBR, the current capitalization allows implementation of the new capital requirements under Basel III.
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