Rate of non-performing loans to drop below 17 pc

Romania’s rate of non-performing loans will drop below 17 percent after the new European reporting system is implemented, which specifies state bonds will be included in bank portfolios. Last year, the Romanian banking system reported a 21.87 percent rate of non-performing loans
“Different measurement instruments have been used so far throughout Europe. These instruments will no longer differ because the European Banking Authority has determined the index calculation guidelines, so that the same unit of measurement will be used by all countries by the end of the year. Based on the National Bank’s simulations, there will be certain elements which will lead to a drop in the rate of non-performing loans,” Bogdan Olteanu, vice-governor of the National Bank of Romania (BNR), stated at a conference entitled ‘Restructuring, a Measure of Recovery for Companies,’ organized by Ziarul Financiar.
The new instrument intends to include state bonds in bank portfolios. “We have been cautious so far towards including state bonds in the calculus, in addition to private bonds. From an accounting perspective, it will cause a reduction, but this index will also improve Romania’s image in the eye of investors who wish to enter the distressed market,” Olteanu pointed out. In his opinion, the rate of non-performing loans can be expected to stabilize on the medium term.
Banks are continuing their “portfolio tidying-up operations,” Olteanu added, but only 5 percent of non-performing loans were granted after the onset of the crisis.
Furthermore, the BNR official noted non-performing loans will not vanish completely, but their rate will be very low. “Non-performing loans will still exist, but non-performing loans granted after the crisis account for below 5 percent of the total. Banks have become more cautious and so have companies, in committing to new loans. We will ensure this trend is maintained because it increases depositors’ confidence,” Olteanu said further. According to the vice-governor of BNR, the downward trend of RON-denominated loan interest rates will not fluctuate as long as the current economic structure remains unchanged. If economic conditions do not change, the exchange rate will stay within the same range, Olteanu concluded.

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