Non-performing loans reported by Romanian banks tripled as a share of total portfolio in the last three and a half years to 18.2% at the end of 2012. This puts Romania on the third position among the European countries worst affected by the non-repayment of bank loans and means that local banks hold almost EUR10 billion worth of bad debt.
“It should be said that the share of non-performing loans in the Romanian banking system has grown gradually over several years and allowed banks to adjust to it. If we look at capitalization and liquidity, the system is doing very well and I don’t think there’s any imminent risk for it,” believes financial analyst Aurelian Dochia.
Banks have had to set aside billions of euros in provisions for potential sour loan losses, which eroded their profits and even pushed them into the red. The aggregate loss of the banking system stood at EUR475 million last year alone.
Foreign shareholders contributed more than EUR1.5 billion to the local banks’ capital in the last four years as instructed by the central bank in order to keep liquidity and solvency ratios in compliance with the legally set standards. Solvency ratio of the entire banking system stood at 14.6%, above the legal requirement of 10%.
Greece and Ireland had a 20.7% and 18.7% non-performing loan (NPL) rate at the end of last year. Right behind Romania in the ranking were Hungary (16.1%) and Slovenia (15%), according to OECD data.
The best positioned in the ranking of non-performing loans are Sweden and Switzerland, with 0.7% and 0.8% NPL rates.
(English version by Loredana Fratila-Cristescu)