Table of Contents

The Economic Potential of a Larger Europe

The Economic Potential of a Larger Europe

Edited by Klaus Liebscher, Josef Christl, Peter Mooslechner and Doris Ritzberger-Grünwald

The Economic Potential of a Larger Europe gives insights into past, present and future issues related to the ongoing EU enlargement process. Providing a unique forum for debate and a multiplicity of views and experiences from both high-profile academics and those who engage with enlargement on an implementation level, this book covers a wide range of topics that are key to a successful transition and integration process and thus to the provision of a prosperous growth environment within a larger Europe. Special attention is paid to monetary integration, notably entry into ERM II, on which representatives of the national central banks involved present their views.

Chapter 19: The Romanian banking sector: progress, problems and prospects

Stephan Barisitz

Extract

Stephan Barisitz Compared to other financial markets, the Romanian banking sector is small and not very developed. According to recent estimates, only about onethird of the population is reported to possess a bank account and less than one-fifth of Romanian enterprises take out bank loans. In terms of loan volume to GDP, Romania accounts for less than half of the average level of central European transition countries, which themselves are still substantially behind the EU-15. However, banking activities have been in the catching-up lane since the crisis the country experienced in 1997–99. Today a major share of the assets of the banking sector is in foreign ownership. As a consequence of the swift credit expansion in 2002 and 2003 and of continuing structural problems the risk potential has risen recently, though.1 1. BANKING CRISIS AND REFORM MEASURES Until 1998 the Romanian commercial banking system was overwhelmingly state-owned. Credit institutions were granting loans to a largely unrestructured real sector dominated by large, inefficient, state-owned factories, subject to quasi automatic refinancing by the Romanian National Bank, which conducted an accommodative monetary policy. Inflation rates were very high. For example (year-end) CPI inflation amounted to 62 per cent in 1994 and 57 per cent in 1996. After the election of a more strongly reform-minded government at end-1996, serious macroeconomic stabilization policies and structural reforms were initiated. The Romanian National Bank (Banca Nationala a României, BNR) tightened its hitherto lax ¸ banking supervision policies. The quasi-automatic central bank...

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