For quite a while now, the Romanian Association of Banks (“RAB”) has been committed to an open and constructive dialogue with all the banking sector’s stakeholders, with a view to represent the interests of its members, but also to identify the most sustainable public policy actions with direct impact upon Romania’s economy, thus contributing to enhancing the welfare of Romanians.
We are convinced the 26 years of activity stand as pledge of our experience that, per se via real and objective debates, the best policy recommendations can be identified, policies that answer both the Romanian citizens’ expectations, as well as the banking sector’s stability and credibility criteria.
Being the representative body for the entire Romanian banking industry, RAB has consolidated its position as partner of choice for dialogue and consultation with authorities, in the process of promoting either legal initiatives or new projects. On an on-going basis, RAB carries out its mandate to present, in an honest and objective manner, before policy-makers and not only the banking industry’s position and arguments related to the many initiatives targeting the financial and banking industry and their potential impact.
If, at European level, there are discussions now about the need to enhance the integration of the new EU 27 union and to mitigate the consequences of Brexit, internally, we could establish and commit to two possible objectives which could transform Romania’s economy; these could be Romania’s joining both the Organization for Economic Cooperation and Development and the euro monetary area. These two anchors are an additional guarantee to focus national policies on gaps recovery in relation to the European Union countries’ averages.
As regards our industry, we can proudly state that the Romanian banking sector has gone through the global financial crisis without the Romanian state’s bailing out any bank – as things happened in other 23 European Union Member States. Only 5 EU countries did not contribute with tax-payers’ money from the state budget to bailing out banks and Romania is one of them. The losses inherent to this period – losses incurred by banks operating in Romania – were borne exclusively by the shareholders. During the eight years of crisis, the shareholders’ equity contributions amounted to about €3.5 billion across the whole banking sector. Consequently, the Romanian banking sector can successfully carry out its mandate of the main financier of economic growth in the country.
Nowadays, the Romanian banking sector has strengthen its structural stability, being one of the best capitalized European banking sectors and, for sure, with 40% immediate liquidity is the most liquid banking sector in the European Union. In Romania, the banking sector has had a performance that can be assimilated to the concept of “best practice” at European level, due to the fast decrease of the NPL ratio in less than 3 years – from 23.7% to 8.3%. Our objective for this indicator is reaching the average European level of 6% by the end of 2017.
During this entire period, the banking sector has demonstrated its resilience to external and internal factors (including populist legal initiatives) and regained its profitability and amenity for investors.
With a high solvency level, we are certain that the banking sector will contribute decisively to enhancing the country’s economic welfare via its capacity to support a robust growth of financial intermediation.
Romania should resynchronize its economic cycle with its financing cycle that has had a moderate growth, so that, in the end, the enhancing of the production capacity and of the entrepreneurship outcome, of productivity in general, are able to generate the virtuous cycle of multiplication via credit.
We have to increase the financial intermediation from the lowest level in the European Union (29 %) to a level closer to our peer countries or at least to the level we had in 2008, i.e. 40% non-government credit as GDP percentage; the banking sector is ready from the point of view of its structural ratios to carry out this desideratum/
The directions where we could have a convergence advantage (that is to say our cruising speed becomes higher than the speed of the group we are chasing) would be precisely the ones where Romania ranks last in Europe now. The paradox is that, generally speaking, our opportunities may come from areas where one could say we have a problem today. And I will mention here but three fields: financial inclusion (only 62% in Romania compared to over 90% at European level), the digital agenda (we rank last in Europe based on the DESI index but we rank second in high speed connectivity) and financial literacy, where Romania ranks last in Europe 28 and where, with little eff ort, we could have special traction in sustainably enhancing financial intermediation.
In this context, RAB’s initiative to implement a banking sector strategy targeting this national interest – growing economic welfare – should be praised. The banking community’s projects have as target to speed up the introduction of digital technologies in financial & banking services via the Platform for the Digital Agenda, to enhance the level of financial literacy via the Financial Literacy Platform and to integrate financial intermediation with a view to enhance the rate of accessing European funds, develop Public Private Partnerships and finance large investment projects.
It is but natural that banks be concerned with enhancing mainly SMEs capacity to be granted loans. The more resources an economy needs – consequently a higher level of financial intermediation can be generated – the higher the economic outcome on the overall can be.
The concern of the banking community to improve standards of conduct and culture in the banking sector plays an important role in reducing the confidence gap faced by the banking systems in general and especially in countries with a low level of financial literacy.
The conduct and culture in banking practice are major national and European topics where our voice is heard via the associations where RAB is member. This year, we have raised this topic before the European Banking Federation when we have tackled upon and analysed various Codes of Conduct’s models and best practices.
We have to do more as regards to conduct. Banks should commit more proactively to a self-regulating role when it comes to conduct and penalise the deviations inside the community, so that the situations like those in the past when the lack of trust spread across the industry do not happen again. It was quite a long time ago that we have overcome the moment when a bank action was solely the respective bank’s concern. Nowadays, we are at a point in which what a bank does is the problem of the entire industry. Based on the data available in respect to regaining the lack of trust, we can draw the conclusion that we have been on a positive trend lately. Nonetheless, we should be careful when it comes to the increase of what is termed the trust asymmetry trend – namely trust is regained faster by those better informed and are financial literate.
At the same time, banks should learn from the lessons of the legal initiatives proposed in the previous years and adjust their conduct via a proactive approach, in order to eliminate in this way the risk of future populist actions which, at the end of the day, mean high costs on society.
To conclude, I would like to thank all our partners, the management of banks, the members of the RAB’s specialised commissions and the executive staff for their contribution to the carrying out of the projects and objectives of the banking community.
President of the Board of Directors
Romanian Association of Banks