Banks and other financial sector companies such as insurers and leasing companies were severely affected by the financial crisis and the foreign shareholders had to increase their capital to offset losses or keep performance indicators within the required parameters.
“Banks needed additional capital because they had a lot of work to do on their balance sheets. The process is not over yet,” says Matei Paun, managing partner of BAC Investment.
“There are two sides to this: one that has to do with accounting and financial reporting and an operational component. They focused more on the theoretical side of things than on the operational side. Only when the balance sheet restructuring has been completed the banking system will be sound enough to no longer need capital contributions so badly.”
The local banking system has had to deal with a very high ratio of non-performing loans, one of the highest in the European Union. The NPL ratio reached a peak of 22% at some point but is now down to 17%, as a result of changes in the calculation method and of the removal from balance sheets of the fully provisioned loans.
Banks sped up portfolio cleanup process by selling troubled loans to debt collection companies or simply removing the fully provisioned loans from their balance sheets.
Volksbank, BCR, Intesa Sanpaolo and BRD saw the highest capital increases in 2008-2013, as their capital was more than three times higher at the end of last year than in December 2008.
BCR and BRD, the market leaders by assets, are also the leaders of the share capital ranking.
Romania’s central bank in 2009 required banks to improve solvency ratio to 10%, higher than the EU requirement of 8%. Banks had a low solvency ratio at the beginning of the crisis, which has now improved to about 17%, as a result of portfolio cleanup and low lending appetite.
CEC Bank, the only top lender still state-owned has increased its capital only by adding its profits to it over the last few years. EU restrictions did not allow the Finance Ministry, its owner, to contribute any capital to it.
Capital increases in the banking system stood at about RON700 million in the first half, for a total of RON25.9 billion.
(English version by Loredana Fratila-Cristescu)