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Worst may be still to come for Romanian banks

Romanian lenders must wait at least another year to breathe easily, as the worst part of the crisis is yet to come, according to central bank's head of supervision division Nicolae Cinteza.

Speaking at a seminar Wednesday, Cinteza said the weight of non-performing loans in the Romanian banking system might increase further in 2010."In my opinion, the 2010 year will be worse than 2009 and the first six months of 2010 will be decisive for the Romanian banking system. Fortunately, we have a high solvency ratio, of 13.7%, but this also indicates limited capability to make profit," Cinteza said.

The central bank's official said the banking system was able to report profit in the first nine months of 2009 thanks to a regulation allowing lenders to cut provisions on non-performing loans by 25% of the guarantee value.According to Cinteza, the central bank's amendment was the most significant legal change in the banking system in 2009. Without it, the banks would have surely report losses in the first nine months, he added.

"By October, we can see a slight recovery and the profit is somewhat rising," Cinteza said. Romanian lenders reported combined profit of RON680 million in the first nine months, down nearly five times from the same period a year earlier, according to central bank data.In the third quarter alone, the combined profit climbed six and a half times to RON590 million from RON90 million in the first six months.

The banks' provisions amounted to RON12.9 billion in the first nine months, up nearly 70% from the end of last year.Overall net assets rose stood at RON322.46 billion at the end of September, 2.55% higher compared with the end of 2008. End September, Romanian banking system's solvency ratio was at 13.73%, similar to the 13.77% ratio recorded in December 2008.In 2008, Romanian lenders reported combined net profit of RON4.4 billion.

Romanian Banks Could Book Lower Provisions For Rescheduled Loans

Romanian lenders might be motivated to refinance or reschedule loans for which they could book lower provisions, if the central bank approves a proposition of the local banking association ARB to change the classification of loans and provisioning regulations.Currently, banks cannot include a rescheduled or refinanced loan in a better risk category.

Lending regulations might need certain clarifications, so that banks might analyze more carefully the debtor's financial situation and be able to include the loan in a better risk category, said Nicolae Cinteza, director of the central bank's supervision department.On the other hand, Cinteza said banks cannot apply international bookkeeping standards IFRS only for provisions, because a standard cannot be applied only when it is suitable. "It cannot be made on pieces... I think the IFRS will be applied in 2012. It must be applied for the entire economy," Cinteza said Wednesday.

According to him, any change in the provisioning regulation might be approved only with the prior consent of the International Monetary Fund.In the first nine months of the year, the value of Romanian banks' provisions was at 12.9 billion lei (EUR1=RON4.2249), up around 70% compared with December 2008. In October, banks' provisions rose to RON13.9 billion.Early-November, ARB president Radu Ghetea said lenders asked the central bank to change the norms to allow them to change the classification for a rescheduled loan for the remaining period, until its maturity.

Sursa: http://www.actmedia.eu

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