FX/interest risks are daunting again

The interest risk and especially the foreign exchange risk are the main risks the Romanian banking system is facing now and will keep facing in the future, a survey of the National Bank of Romania shows.

Compared with a similar survey conducted by NBR in 2002, the foreign currency risk rose rapidly in the top 10 greatest risks that may have a negative impact on the banking system in the future, ranking fourth, while the interest risk went up two places, ranking third.

As far as the FX risk goes, the concern stems – amid the boom witnessed by the foreign currency lending, from the very high volatility of the EUR/USD rates on the international markets, on the one hand, and from the scarcity of hedging instruments on the Romanian market, on the other.

At the same time, the central bank’s report estimates the foreign imbalance that is getting worse makes a foreign currency adjustment more likely. The interest risk in its turn will become all the more significant – bankers and central bank representatives feel, because once the inflation has gone down, the banks’ portfolios of investments and resources with fixed interests will increase, widening the gap between investments and resources attracted maturity-wise.

In the opinion of the bankers, another factor impacting on this risk is the unpredictability on the monetary market introduced by the repeated modification of the intervention interest by the central bank.

Whereas this indicator had been clearly following a downward trend in the first half of last year, the central bank resumed a policy to raise the intervention interest again in August, bringing it up by three percentage points in only three months, that is by more than 16%.

NBR’s survey had 46 answers sent by banks (22), central bank employees (20), consulting firms (2), investment banks operating in Romania (1) and international commercial banks’ offices in Romania (1).

The credit risk, still in the lead by a healthy margin, is seen by most of the respondents as on the rise, given the expansion of the lending business, particularly on the retail segment. The loosening of the lending terms (guarantees inclusive) on this segment, as well as the lack of a Credit Bureau are factors that negatively influence this risk.

Furthermore, the increase in the foreign exchange risk itself deepens the credit risk. The concern is also caused by the fact that the total volume of consumer loans rose by more than 300% last year alone, which is way too much, financial sustainability of this growth considered. oana.nuta@zf.ro