End-January, the provisions for potential bad loans reached some RON22 billion under IFRS. Calculated under the local accounting standards, overall provisions stood at RON32 billion.
“The data show a decline of some RON10 billion, but thanks to the impact filters set up by the central bank, the surplus doesn’t affect the prudential indicators in the system,” Nicolae Cinteza, head of the central bank’s supervisory department, told Mediafax.
“This isn’t some artificial increase of the banks’ solvency ratios,” he added.
In January, Romanian banks replaced the local accounting standards with the international ones. The two reporting systems have different methodologies for loan loss adjustments and banks had to free up some of the cash stored for potential bad loans to avoid over-provisioning.
The freed cash may be used to increase the banks’ reserves, or it could be distributed to shareholders as profit for 2011.
The provisions unlocked in January cover tenfold the loss reported by the local banking system in the past two years. If treated as distributable profit, the amount would make for the biggest yearly profit ever recorded in the system.
Romanian banks reported combined losses of approximately RON430 million in 2011, after a loss of RON516 million a year earlier.