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BNR: Cut of financing from foreign parent banks would send two local branches in trouble

A complete cut - in theory - of financing from foreign parent banks could send two local branches in trouble, vice-governor of the National Bank of Romania (BNR) Cristian Popa told a monetary policy seminar.

On the other hand, stress tests performed by the central bank showed the absence of systemic risk in the theoretical scenario of the cut-off of foreign credit lines amid international financial turmoil. The BNR official underscored the need to restrict the piling up of foreign currency credits and the risk that the trend of more moderate exposure on Romania continues. Popa, who tackled risks for Romania in the current economic and financial context, said that as far as economic growth is concerned, risk is also limited through foreign commercial exchanges. He highlighted the persistence in the temporary deviation from the announced inflationist track and warned that Romania is not disconnected from international markets. In turn, BNR chief economist Valentina Lazea said that in the highly unlikely eventuality that a bank in the local system collapsed, the one to bear the costs should not be the Romanian taxpayer, because banking services are still poorly correlated with property and stock exchange markets. Economy grows by 6 pct and is far from recession, most local banks are foreign owned private entities and banking services still account for a modest share of the GDP, and one cannot say that overall, the 'system's exuberance has benefited society, that therefore has to pay,' Lazea explained. The BNR official said that in the current context, there is the global perception that financial losses from the private sector will be covered from public money, the more so as in countries like the US and Great Britain, the banking system, the property and stock exchange markets are extremely tightly related. Sursa: http://www.rompress.ro

Tags: local banks foreign bnr

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