Leumi: Firms file for insolvency, ignoring risks

Most entrepreneurs of small and medium-sized enterprises
(SMEs) voluntarily file for insolvency, and later come up with
formal restructuring plans, says Laurentiu Mitrache, chief
executive of Bank Leumi, the Romanian subsidiary of one of the
largest Israeli financial groups. “With SMEs all restructuring
plans are formal, and they go through all the instances –
administrator, syndic judge with an almost blameable ease. 80% of
clients file for insolvency themselves, ignoring the fact that if
you are going through such proceedings, you cannot resume
operations when the market recovers and you are left with a
tarnished track record,” Mitrache says. As far as Bank Leumi, a
small player on the Romanian market, is concerned, around 3% of
SMEs in its portfolio are facing financial problems. The head of
Bank Leumi says the current regulatory framework offers excessive
protection to debtors, while banks face red tape hurdles when they
try to foreclose upon the collateral of the loans. “The regulatory
framework is unbalanced. We are currently heading towards a
blockage in the creditor-debtor relationship, which is not
generated by the creditors’ attitude. An image is created that
banks do not unfreeze lending, but actually this is not happening
because we don’t have an adequate legal framework,” believes
Mitrache.