Foreign banks have withdrawn one billion euros in the first quarter alone, compared with EUR2 billion in the entire 2015.
“We’ve been seeing a divergent evolution of banks’ external and domestic resources, especially starting with 2012. As a result, resources from parent banks declined by more than 50% between December 2008 and March 2016, which reduced the dependence on parent banks and decreased the foreign contagion risk. External resources have been gradually replaced by domestic ones, which are on the rise.”
The deleveraging process whereby foreign banks reduce exposure to local subsidiaries started in 2009 and does not appear to be over yet. The central bank data show it to have accelerated at the beginning of this year.
Faced with dwindling support from parent banks, the local subsidiaries have to resort to using more and more local resources, which has actually been happening in the past few years. Deposits attracted from local customers went up EUR17 billion to EUR55 billion in December 2008-March 2016. The funding withdrawn by foreign shareholders has been completely replaced by domestic resources.
Despite ceasing support for local subsidiaries via lines of credit, foreign shareholders continue to provide capital to Romanian banks, to comply with the requirements to increase capital of the central bank. Capital injections stood at EUR700 million last year alone.
The local banking system is almost 90% foreign held and Romania’s central bank tried to prevent deleveraging through the Vienna Initiative of 2009. The nine major foreign banks in Romania signed it and agreed to keep their local exposure unchanged. They only kept their financial support unchanged between December 2010 and December 2011.
(English version by Loredana Fratila-Cristescu)