National Bank of Romania (BNR) First Deputy Governor Florin Georgescu (photo) claims that the Romanian banking system bounced back to profit in the first quarter of this year. At the same time, the BNR official pointed out, the re-launch of crediting consolidated itself on the basis of internal savings, but the future mission of the banks’ risk management policies has to centre on maintaining the prudential balances obtained with significant efforts and at significant costs, with the stress laid on rigorous resource allocation standards.
“The Romanian banking system is going through an orderly process of recalibrating its own activity in line with the new European action that concerns the achievement of healthy financial leveraging. The consolidation of crediting re-launch conditions on healthy bases and destinations has registered important progress against the backdrop of the reorientation of financing sources toward internal savings and of the clearing of bad loans from balance sheets. (…) At the same time, the banking system’s profitability has re-entered positive territory, the first quarter data pointing to a moderate level related to the assessment standards applied by the European Banking Authority, namely a financial profitability of 9 per cent,” Florin Georgescu stated on Tuesday at the Summer Banking Academy, an event organized by the Romanian Banking Institute.
According to him, the two fundamental pillars of banking sector solidity – solvability and liquidity – register high levels in the Romanian banking system, with there being significant prudential room for new financing, including against the backdrop of accommodative monetary policies implemented by the National Bank of Romania.
“The future mission of risk management policies consists of maintaining the prudential balances obtained with so much effort and at such a high cost, focusing on rigorous resource allocation standards. The quality of crediting is more important than its volume, because it facilitates the return of crediting on a trajectory compatible with a sustainable development of economic activity, including on the basis of economic resources freed by the structural reforms implemented in the economy, and this development will lead to intensified real convergence, which represents a fundamental condition for the sustainable fulfilling of Euro Zone accession criteria,” the BNR First Deputy Governor added.
The Central Bank representative also pointed out that recent reality has shown that neglecting risks or some of their aspects can have particularly costly consequences from the standpoint of a bank’s result or even viability. “Moreover, the banking system’s actual capacity to fulfil its functions can be affected, namely financial stability, against the backdrop of the contagion effect manifesting itself on the other banks. Rigorous risk assessment is not only an issue that has to be solved in order to meet the requirements of the regulatory authority – not deregulatory authority as desired until now, there will be more regulation from now on in order to lower the amplitude of the economic cycle between expansion and recession – but also a main element of a bank’s long-term competitiveness,” Florin Georgescu added.