Romanian c-bank says 18% of corporate loans are to firms now under insolvency

By bne IntelliNews October 7, 2013

Some RON 23.6bn [EUR 5.3bn], or 18% of the Romanian corporate loans, are owed to domestic banks by firms currently under insolvency procedures, the central bank’s director for legal affairs, Constantin Paunescu, announced as quoted by Ziarul Financiar daily. Most of the collaterals for these bad loans are real estate properties [not liquid].

An increasing number of firms relies on insolvency procedure, central bank data revealed. The companies that went insolvent in 2012 were employing 20% more workforce than those that went insolvent in 2011, their assets are double and their bank debts are significantly higher - RON 7.9bn compared to RON 4.4bn a year earlier.

The statement is made in the context of a controversial amendment operated by the government to the insolvency procedures. Public criticism is based on tighter terms set for insolvency procedures that might in principle result in a larger share of firms not managing to recover but rather go into a more radical stage of bankruptcy.

What central bank says is that banks lose too much money from the lengthy insolvency procedures. Indeed similar complaints were frequently publicly expressed by companies complaining of their partners filing for insolvency solely for the purpose of avoiding payments. PM Victor Ponta also mentioned the insolvency procedures as a key reason for this year's weak budget revenue.

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