The National Bank of Romania is releasing the 5th Financial Stability Report. The document assesses the financial system’s soundness and capacity to withstand significant challenges during the recent period, the factors that influence the performance of the financial system and its interaction with real economy and external environment.
The Report highlights that, during 2009 and the first half of 2010, the Romanian financial system faced significant challenges in a context marked by ongoing economic contraction and structural adjustments. Nevertheless, financial stability remained resilient during the period under review, on the background of increasing bank capitalization to comfortable levels, maintaining adequate liquidity and sustained provisioning efforts.
Banking sector resilience and capacity to withstand shocks are also backed by the stress testing results to economic shocks, according to NBR’s exercise.
The Report highlights that international macroeconomic developments and the ongoing domestic adjustments are important factors that put pressure on financial stability in the short term.
Credit risk remains the main vulnerability of the banking sector. Companies’ and households’ capacity to properly service their debt is constrained by the prolonged and deep economic contraction, as well as the significant degree of indebtedness, in general, and high foreign currency-denominated debt, in particular, for some categories of borrowers.
In this context, the NBR continued and diversified its prudential approach stated in the previous Report, by providing adequate liquidity, closely monitoring banks and improving the prudential regulation framework.
Steady NBR supervising and the financing arrangement signed by the authorities with the EU, IMF and other international financial institutions, along with the commitments assumed under the European Bank Co-ordination Initiative by the nine largest foreign banks operating in Romania, have contributed to maintaining financial stability indicators within adequate limits.
The other components of the financial system were significantly affected by the crisis, but systemic risk has remained low.