Romania Financial Sector Report - Q4, 2013

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Romania Financial Sector Report - Q4, 2013

This report looks into the deleveraging incurred by the Romanian banking sector under the pressure of BIS-reporting banks reducing their exposure to the region. It is based on information available as of end-February 2014—meaning BIS data as of end-Q3 2013—and on more recent data from the national central bank. The process is discussed in a regional context, which is described rather exhaustively. The region is defined as the eleven new EU countries in the Central and Eastern Europe plus non-EU Western Balkans countries (Albania, Bulgaria, Croatia, Czech Republic, Hungary, Macedonia, Moldova, Montenegro, Poland, Romania, Slovak Republic, Serbia, and Slovenia), as well as Belarus. Calculations for Russia, Turkey, and Ukraine were run separately for comparison purposes.

BIS-reporting banks have reduced their exposure to Romania’s banking system from 22.2% of GDP at the end of Q3 2008 to 16.6% of GDP five years later, at the end of Q3 2013. The ratio was slightly above the region’s average before the credit crunch and remains slightly higher five years later. The 5.6 percentage points contraction compares to the 4.4 pps average decrease calculated for the region. We have also calculated BIS-reporting banks’ claims as a percentage of banking assets. The ratio decreased from 35.9% at end-Q3 2008 to 18.7% five years later.

In absolute terms, the XR-adjusted value of the funds withdrawn by BIS-reporting banks from Romania over the five-year period amounted to EUR 11.4bn—which is 37% of the initial exposure at the end of Q3 2008.

Key Points:

• This report covers Albania, Belarus, Bulgaria, Croatia, Czech Republic, Hungary, Macedonia, Moldova, Montenegro, Poland, Romania, Slovak Republic, Serbia, and Slovenia, as well as Russia, Turkey, and the Ukraine for comparative purposes.

• Foreign banks’ repatriating part of their funds from the region was compensated fully (in most of the countries) or partly by the creation of local resources (deposits and equity). Romania is among the 11 countries of the 18 (no data available for Moldova) where the volume of banking assets increased over the five-year period.

• While the bulk of outflows were in 2009, fund withdrawals also intensified in 2012–2013.

• BIS banks’ exposure shrank by 7.7% of 2008 GDP over the five years, but local resources (deposits and equity] increased by 22.3% of GDP so that total banking assets increased by 15.5% of 2008 GDP.

Table of Contents

Executive Summary
1. Banking System’s Assets
2. Foreign Banks’ Exposure to Region
3. XR-adj Change in BIS Banks’ Exposure
4. Analysis
5. Romanian Banking System – B/S Structure

Number of pages: 11
Release Date: Sun, 09 Mar 2014