The profitability of the Romanian banking system stood at 13.2 per cent at the end of last year, two-times the EU average registered in September, while the loan loss provision ratio stood at 58 per cent, far above the 44 per cent European average, according to a National Bank of Romania (BNR) analysis.
Thus, the ROE profitability indicator climbed by 5.6 points in the last quarter last year, from 7.6 to 13.2 per cent, being within the best prudential interval within the risk dashboard.
The Central Bank’s analysis on the Romanian banking system was based on the data individually reported by banks, being similar to the European Bank Authority’s “Risk Dashboard” quarterly report, and took into account EBA’s methodology and the assessment intervals established.
“This analysis was possible against the backdrop in which the prudential monitoring framework has been harmonized at European level and the reporting standards set by the EBA are directly implemented in all EU member states ever since the start of 2014,” BNR points out.
The indicators are grouped in four categories: solvency, asset quality, profitability and balance sheet structure. Each indicator is assessed in relation to three prudential intervals, its value being thus considered very good, intermediary or deficient in relation to the value interval it is part of.
The risk dashboard data on the Romanian banking system shows that most indicators are within the best prudential interval, both in September 2015 and in December 2015, the result being superior to the European average that falls within the “intermediary” interval with almost all of its indicators.
The bad loan ratio and restructured loan ratio are an exception. Despite remaining within the value range that the EBA considers deficient, they registered a significant decline in the last quarter of last year, by 2.1 percentage points in the case of the bad loan ratio and by 1.1 percentage points in the case of the restructured loan ratio.
Nevertheless, these vulnerabilities were diminished by the third indicator that analyses the quality of assets, namely the loan loss provision ratio, which puts the Romanian banking system within the most prudent interval, at 58 per cent, far above the European average of 44 per cent.
The balance sheet structure is well balanced and respects the best standards in what concerns the ratio between assets and liabilities, total debts and own capital.
The solvency indicators, although slightly adjusted toward the end of 2015, maintain a high level that places them within the best prudential interval.