According to the commitments made to the International Monetary Fund, all necessary procedures should be decided on by the end of this month. The project is being conducted by a think tank led by First Deputy Governor Florin Georgescu, who is in charge of supervision and regulation.
The central bank has three types of restructuring measures available for the banks identified as major risk factors for the banking system: total or partial transfer of assets and liabilities from a bank to one of several solid lending institutions; getting the Deposit Guarantee Fund involved as delegated administrator and even as a shareholder of a bank whose majority shareholder had its voting rights suspended; and the transfer of assets and liabilities from an ailing bank to a specially created bridge bank.
According to this year’s edition of the Convergence Program published by the Finance Ministry, the central bank has already put together the internal procedure which includes the criteria and the parameters for identifying big banks that could in theory create imbalances in the entire system, and would be suitable for being rescued with the help of a bridge bank.
Important elements in the evaluation are market share based on the value of the loan portfolio and on the value of the deposit portfolio.
In the Romanian banking system there are seven banks with market shares above 5% in terms of their balance sheet assets, according to end of 2011 data, but this parameter is not relevant for the position of these banks on the deposit market, considering that up until recently the bulk of financing came from abroad. Three other banks have asset-based market shares larger than 3%.
The procedure of identifying systemic banks will be part of a wider package of procedures detailing the usage of the rescue instrument generically called “bridge bank.”
The package also includes the press release models that the central bank will use to communicate to the public the application of one of the three bank restructuring measures. According to the Convergence Program, these measures have already been put together. Communication will play a very important part and will have to be done very carefully in order to avoid panic among the clients of banks targeted by the central bank’s restructuring measures.
The standard contract for the acquisition of assets plus liabilities is also ready.
In order to find lending institutions interested in taking over assets and liabilities from an ailing bank, BNR will ensure – based on an initial confidentiality agreement – the access to relevant information and will facilitate the evaluation of assets and liabilities to be taken over.
If there are several offers, the central bank will choose the most advantageous one in terms of the objectives targeted by the transfer, with guaranteed deposits to have priority for the transfer. The amounts resulting from this move will go to the credit institution that handed over the assets/liabilities. The state guarantees bank deposits up to EUR100,000 or the equivalent amount in lei.
At least up to now, the central bank believes the stability of the financial system is robust, which has been confirmed by the latest reports of the IMF. However, experts of the international financial institution have continued to warn over the risk of problems for some of the small banks.
(English version by Daniela Stoican)