Romanian central bank believes some banks restructure loans only for capital adequacy purposes

By bne IntelliNews August 29, 2013

The Romanian central bank suspects that some commercial banks have restructured part of their bad loans only for capital adequacy purposes and not because the debtors are really able to pay back their dues under the looser terms, the head of the c-bank's supervision department Nicolae Cinteza told a news conference as quoted by Ziarul Financiar daily.

Romania’s central bank will check the loans that have been restructured three or four times already and in case the payment discipline has not improved will enforce tough sanctions.

In case the restructured loans are re-classified as bad loans, the banks’ capital adequacy ratios might deteriorate and shareholders would be asked for more financing.

Romania’s central bank will screen the first 500 largest restructured loans in each bank’s portfolio, Cinteza explained. In case the debtors have not paid at least the interest after their loan was restructured, it is a clear sign that the restructuring was done only with the purpose of hiding bad loans.

Commercial banks do not provide data on their loan restructuring and the central bank is thus not able to aggregate such indicators for the banking system.

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