Banking assets valuation in Romania, scheduled for next year, BNR announced

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National Bank of Romania (BNR) will start next year the “comprehensive” assessment process of the banking system assets, based on the European methodology – European Banking Authority (EBA), according to a decision of the Board of Directors, Governor Mugur Isarescu announced Wednesday in a press conference.

Thus, the nonperforming loans (NPL) ratio was cut from 20.2 percent in March 2015 to 13.51 percent at the end of last year, and is expected to increase slightly to 13.52 percent in the first quarter of this year.

As a result, banks’ assets were down after the first three months by RON 7 billion (1.9 percent) against the end of last year, to RON 370.2 billion (EUR 82.7 billion).

Central Bank Governor says that there have been taken critical decisions during the economic crisis that have contributed to reducing NPLs rate, without the central bank having to seek “emergency” solutions for the bad banks, financial institutions that collect bad assets or for State aids in the banking system, as happened in other states.

“The decisions that have been taken by central bank were essential. We put banks to conduct an assessment of guarantees with independent auditors. These measures were initiated in 2013 and are repeated every year. We did not get applause, but the measures were essential,” Isarescu pointed out.

He also said that if the level of bad loans is unknown or if it is just suspected and not proven, this leads to lower lending amid loss of confidence.

An IMF analysis showed recently that timely resolution of bad loans problems could release equities of 0.5 percent of GDP, which could contribute to credit growth to 5 percent of GDP.

On the other hand, attending the event, Florin Georgescu, BNR first Vice-Governor stressed that the legislative instability can lead to an increased non-performing rate in the banking system, given that the mere publication of the Debt Discharge Law in the official gazette lead to an increase of the capital needs of credit institutions.

Georgescu emphasized that, in the short term, to keep under control the level of bad loans must be ensured the stability and predictability of the national legislature, totally connected to the EU legislative system, “not to have counterproductive bases”.

 

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