Romania’s banking system is ready to handle the effects of the pandemic crisis, as it is well capitalized and has adequate liquidity; lending has shown signs of revival after sharp fall in demand during lockdown; although better prepared than during the 2008 crisis, banks do expect a rise in non-performing loans in 2021 – are some of the takeaways of the ZF Bankers Summit 2020 conference.
There is still room for interest rate cuts to stimulate lending after the central bank cut the key rate twice this year already, to 1.75%.
“Fortunately, Romania still has ample room for monetary policy even though there have been constraints. This has allowed the central bank to adopt a liquidity management policy to counter the shock,” said Leonardo Badea, central bank deputy governor.
Besides low interest rates, a relatively stable exchange rate is important for loan customers and for the economy.
“We are optimistic but we need to remain prudent and cautious. But if we are overly cautious, there is no financing,” said Omer Tetik, CEO of Banca Transilvania, Romania’s largest lender.
As the economy ground to a near halt during lockdown, lending demand dropped sharply but is now showing signs of recovery. There are opportunities on the market, companies willing to invest and banks are willing to finance investments, several bank representatives said.
Investments and consumption are excepted to cushion this year’s economic downturn and lay a solid groundwork for growth in 2021, finance minister Florin Citu said. He said the Romanian economy is expected to rebound quickly in 2021.
The finance minister added the government maintains its projection that the economy will contract just 1.9% this year, adding the European Commission’s 6% estimate was overly pessimistic.