Dănilă, NBR: Bankrupting customers is not how you plug losses

Banks need to urgently resume lending in order to support the economy, while losses in the banking sector cannot be plugged by driving customers to bankruptcy, believes Nicolae Dănilă, a member with the Board of Directors of the NBR (Romanian central bank).
“Banks need to urgently return to their principal mission: to grant loans in order to support economic development, by efficient use of the financial resources they attract from the Romanian market. In view of returning to economic growth and to lending, banks’ business model will need to change. Most likely, the model of economies of scale will be dropped in favour of one that can ensure solid, but gradual growth, based on a tight and long-term relationship with customers,” said Dănilă in an analysis titled “The role of the banking system in the return to economic growth.”
He says the major increase in overdue and in doubtful loans from 2007 until 2010 shows banks did not calculate the non-repayment risk very well, and relied on covering the losses through the large volume of business.