Banking system stable after $4bn losses

The Romanian banking system is among the most stable in the region at the moment, with the banking prudentiality indices among the top performing ones, National Bank of Romania vice-governor Mihai Bogza says. A concentration of the banking sector will occur in the next few years in order to meet the competitiveness requirements, he reckons.
“The banking sector restructuring entailed substantial costs. The money came from the State, from the other banks, from the depositors that had more money in the banks than the State could afford to give back, or even from the shareholders who were required to make capital injections to save some of the banks,” Bogza told the “10 years of banking reform” seminar.  Restructuring of the banking sector, starting from the liquidation of Bancorex and the purging of the Banca Agricola (Agricultural Bank), to the elimination of several other smaller banks like Albina or Banca Internationala a Religiilor (International Religions Bank – BIR) cost nearly 4 billion dollars. At the same time, saving Banca Dacia Felix cost the Central Bank $500 million, most of which still not recovered.
According to the NBR vice-governor, the best thing that reform did was to restore people’s confidence in banks. “The banking deposit volume increased by 20.6% in real terms last year and by 5.7% in the first nine months of 2002.”
As regards the future policy of concentrating the banks in the Romanian system, Bogza says, “the weaker banks will finally come to realise that size does matter.”
The National Bank of Romania has made it very clear in the course of time, but mainly since this year, that it supports M&A among the commercial banks, as soundness is more important than the number of banks in the system. “I said it before and I am saying it now, it is not the number of banks that matters in NBR’s opinion, but their strength. Although brokerage is still quite uncommon among banks, I believe the banking system has got all it takes – as it is clean and has an extremely sound capitalisation basis, to take over the major task of financial brokerage in the economy,” NBR Governor Mugur Isarescu said.