Banca Naţională a României

The National Bank of Romania is launching the 7th edition of the Financial Stability Report. The publication assesses the soundness of the Romanian financial system in 2011 and the first half of 2012, analyses its interaction with the real economy and the external environment and identifies the main challenges to financial stability in the period ahead.

The report shows that financial stability in Romania has remained robust, a challenging environment notwithstanding. The banking sector operated within adequate parameters against the background of still modest economic growth (which also had an impact on the further increase in non-performing loans) and in spite of adverse and volatile external conditions, marked by persistent market concerns over the euro area sovereign debt crisis and its fallout on the banking systems in some euro area countries. Risks to the banking sector were adequately managed thanks to the behaviour of shareholders and managers, in the context of the dialogue with the micro and macroprudential regulatory and supervisory authority and of the steady monitoring and requirements by the latter. Solvency, provisioning and liquidity levels remained adequate and real sector financing was not significantly affected, in the period under review, by the ongoing financial deleveraging which has been moderate and orderly so far.

The non-bank components of the financial system (insurance companies, pension funds, non-bank financial institutions and the capital market) have been impacted by the domestic macroeconomic context which is still under consolidation, as well as by the unfavourable international conditions, without however generating systemic vulnerabilities. The report also reveals the efficient and safe functioning of payment and securities settlement systems, with the National Bank of Romania monitoring their compliance with relevant international standards.

The report shows that the main challenges to financial stability have remained credit risk (arising particularly from the stock of foreign currency loans previously extended to unhedged borrowers) and the risk associated with the substantial rollover of the external financing of domestic credit institutions with majority foreign capital. The ongoing precautionary financing arrangement with the European Union, the International Monetary Fund and the World Bank has provided an anchor of credibility and support for the continuation of reforms that will foster sustainable economic growth, entailing lower pressures on bank asset quality. In addition, improved coordination among the European supervisory authorities and between these authorities and the large banking groups, including via the European Bank Coordination “Vienna 2.0” Initiative, can contribute to mitigating the risk of a disorderly or overly fast financial deleveraging in the period ahead. Nevertheless, the major challenges that are manifest both globally and domestically warrant further efforts towards preserving adequate solvency, provisioning and liquidity levels.