The foreign banks operating in Romania have withdrawn in the past six quarters ending June 2013 some EUR 5bn of their financing previously extended to local subsidiaries, the head of the central bank's supervision department Nicolae Cinteza told a news conference as quoted by Ziarul Financiar daily.
Thus, the foreign financial groups cut by 25% the financing extended to their Romanian subsidiaries. The trend is likely to accelerate because the foreign financial groups are asking back their money, Cinteza stressed.
The EUR 5bn withdrawn was only partly compensated by the EUR 1.7bn contribution to the local subsidiaries’ own funds, the central bank official explained. The rest of the money was covered by local sources -- namely from residents’ deposits.
The key concern is not the deleveraging itself, Cinteza stressed, but the fact that the share of bad loans keeps rising and there is no ground to believe the trend would reverse any soon.
Since the foreign groups are pulling out from the country their resources, the lack of performance [of assets in banks’ portfolio] is going to be covered by local resources, he explained. In case the bad loans are not properly covered by provisions, there is a problem, Cinteza warned. Currently, the stock of provisions covers some 62% of the bad loans, he said, adding that banks with ratios below 50% are under the central bank’s monitoring.
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