Bankers concerned about rise in companies' repayment difficulties

Bankers are increasingly concerned about the corporate segment, where difficulties in repaying loans are on the rise, and are calling for regulations that would encourage clients to maintain financial discipline. Sergiu Oprescu, vice-president of the Romanian Banking Association, says one should avoid situations where companies with hefty loans taken from banks file for voluntary insolvency over small debt. Considering capital adequacy regulations, such a practice ultimately affects the banks’ ability to grant loans. “If a company enters into insolvency proceedings voluntarily, its loan is automatically considered a “loss” and needs to be fully provisioned, with the impact on the capital amounting to 100% of its value. Due to the capital adequacy indicator, such a loan prevents the bank from granting a 12 times higher prospective loan,” says Sergiu Oprescu. For instance, if a company which has a 10 million-euro loan taken out from a bank enters into insolvency, the bank’s capacity to grant loans, if the same equity capital is considered, will be 120 million euros lower.