Edited by Klaus Liebscher, Josef Christl, Peter Mooslechner and Doris Ritzberger-Grünwald
Chapter 19: The Romanian banking sector: progress, problems and prospects
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...