Foreign banks withdraw EUR 5bn from Romania in past six quarters – c-bank official

By bne IntelliNews August 29, 2013

The foreign banks operating in Romania have withdrawn in the past six quarters ending June 2013 some EUR 5bn of their financing previously extended to local subsidiaries, the head of the central bank's supervision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The EUR 5bn withdrawn was only partly compensated by the EUR 1.7bn contribution to the local subsidiaries’ own funds, the central bank official explained.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.

Related Articles

Romanian media tycoon Voiculescu to be released on parole

A Romanian court ruled on July 18 that media tycoon and former politician Dan Voiculescu, who was sentenced to 10 years in prison in August 2014, should be released on parole after serving ... more

Evolution Equity Partners closes $125mn cybersecurity-focused fund

Evolution Equity Partners announced on 17 July the final closing of a new fund with total capital commitments of $125mn to make investments in cybersecurity and next generation enterprise software ... more

Romanian PM's adviser sacked after proposing tax on churches

Romanian prime ministerial adviser Eugen Teodorovici was reportedly dismissed from the post on July 14, the day after he spoke about the possibility of taxing the local Orthodox Church. Teodorovici ... more