1. Most controversial law in banking sector – the debt discharge law, finally cleared up by Constitutional Court
The debt discharge law, which has caused heated debates over the past year, was challenged at the Constitutional Court, which deemed some of its provisions unconstitutional thus reducing the impact of the law on the banking sector. The law will be enforceable only in very few cases, where unforeseen circumstances were at play, and a court of law will review each case. Under the circumstances, the uncertain and unpredictable legislative framework in the financial-banking sector is no longer a ‘severe systemic risk’, according to Romania’s central bank.
2. Banking system headed for record profit of more than EUR1 billion
Banks in Romania made about 3.7 billion lei net profit (EUR817 million) net profit in the first nine months of the year, 1.6 times higher than in the year-ago period. The rise in banks’ profits was made possible by the improvement in portfolio quality and the decline in provisions, as well as by the new loan sales.
The loan-deposit interest margin and the increase in fee and commission income also helped the banks’ bottom line. A significant contribution came from the sale of the Visa shares in the second quarter, as well.
3. Non-performing loan ratio down towards 10%
The NPL ratio in the Romanian banking system, fell towards 10% in 2016, but is still more than double the European average. The vulnerability of the high NPL level in Romania is tempered by the high loan loss provision coverage ratio. The sale of NPLs continued in 2016, when deals reached about EUR1.3 billion.
4. Change at the top of second largest bank in Romania. François Bloch becomes new CEO of BRD-SocGen
BRD-SocGen, the second largest bank in Romania by assets, has a new CEO, François Bloch, appointed in November 2016. He received approval from Romania’s central bank in December. François Bloch, who has international retail and investment banking experience has worked in France, Germany, US and Russia. Prior to his appointment to Romania, he had served as first executive vice-president at Rosbank, the Russian subsidiary of Societe Generale. French executive Philippe Lhotte, who took the reins of BRD-SocGen in 2012 ended his CEO term this year.
5. Interest rates down to all-time lows
The three-month Robor, which banks use to set the cost of variable interest leu loans, started 2016 at 1% per annum, and the downward trend continued, with the index dropping to a new all-time low of 0.68% per annum in mid October. The decline was because of the excess liquidity on the market. Romanians felt this adjustment as lower loan instalments. The three-month Robor fluctuated at around 0.8% per annum in December.
6. Bogdan Olteanu resigns from Romania’s central bank board on accusations of alleged bribe during his time at the Chamber of Deputies
Romania’s central bank board of governors is down to eight members after Bogdan Olteanu, who was deputy governor resigned on accusations of having taken a EUR1 million bribe in 2008 before the joined the central bank, while he was the speaker of the Chamber of Deputies. This was the first time ever when a central bank official was accused of corruption and the first resignation of a member of its board this way.
7. Merger of the year – Banca Carpatica and Patria Bank (former Nextebank)
Only one deal in the banking sector was finalized in 2016 – the merger by absorption of Banca Carpatica and Patria Bank (the former Nextebank), after four banks disappeared from Romania’s central bank’s statistics. The number of banks on the market therefore drops to 36 again. The merger of the two, approved by the central bank, will be done by absorption of Patria Bank by Banca Carpatica, and the latter will remain listed on the Bucharest Stock Exchange.
8. Restructuring of banking system continued
Restructuring of the banking system continued in the first nine months of 2016, with 90 branches and offices closed and 132 employees leaving the system, according to Romania’s central bank data. The restructuring progress slowed down, however. There were 55,796 employees in the banking system at the end of September, and the number of branches and offices dropped towards 4,800. More than one quarter of the number of bank branches were lost after the onset of the crisis and more than one fifth of the number of employees left the system.
9. Lending still in positive territory, feeble growth
Total lending stayed in positive territory in 2016 driven by the rise in leu loans, which hit all-time high after all-time high, while the interest rates on new loans to companies and consumers dropped to all-time lows, as a result of monetary policy easing steps taken by Romania’s central bank. The key rate stayed at the all-time low of 1.75%. The leu lending share in the total continued to rise, and reached 56% of all. However, nine months into the year, total lending only increased by 1.2% to less than RON220 billion and foreign currency lending continued to drop. New loans to consumers reached a new peak in January-September 2016, with the total new loan volume amounting to RON22.7 billion, according to Romania’s central bank. Consumer loans are the main driver of the growth of new retail loans.
10. Swiss franc conversion law in Constitutional Court
The Parliament passed the law converting Swiss franc loans in lei at historical rates but the government decided to challenge it at the Constitutional Court. The Constitutional Court postponed the case until January 2017. The conversion of Swiss franc loans in lei at the historic exchange rates returned to the agenda this year, after having stirred heated debate in 2015, when the Swiss franc reached record highs, following Swiss National Bank’s decision to scrap the long-standing cap on the strength of the currency.
(English version by Loredana Fratila-Cristescu)