The legal framework on insolvency and judicial practice in the matter of insolvency, the uncertainties regarding economic outlook and consumers’ legal initiatives that can aﬀect ﬁnancial discipline are the main aspects that currently discourage lending, according to the „RAB & EY Banking Barometer”.
EY Romania has devised, based on a partnership with the Romanian Association of Banks (RAB), an index of the banking industry called the “RAB & EY Banking Barometer” that shows the trust of the banking industry in the developments of the economy, function of economic conditions, legal amendments and the external environment and proposes identifying solutions to rebuild trust. This survey was performed in the ﬁrst semester of 2014 via a questionnaire deployed with the management of banks RAB members and was answered by credit institutions totalling a market share function of assets of over 85%. The survey will be conducted twice a year.
Bankers appreciate that certain consumers’ legal initiatives and the manner of promoting them could aﬀect ﬁnancial discipline and send wrong messages about banks’ practices. Any legal proposal that aﬀects lending discipline should be avoided where the scope of the law depends on good faith, particularly when the economy needs the banking sector’s stability and lending resources.
Credit institutions are interested in supporting the economy with loans. According to the survey conducted in the ﬁrst semester of 2014, 80% of banks expect the intensiﬁcation of lending in the near future considering the expectations regarding the increase in the loan demand in several sectors and the partial relaxation of lending policies in sectors such as the IT industry, agriculture, telecommunications, healthcare and SMEs.
As regards retail, over 65% of banks expect an increase in the consumer loan demand and even more, namely 75% of them, an advance of the credit card demand. And, a large proportion, i.e. 70% of banks, anticipates an increase in the corporate loan demand. According to the survey, the insolvency legal framework and the manner of enforcing the legislation discourage lending, consider over 85% of respondent banks. The recent amendments to the insolvency legislation bring improvements to the legal framework but there is still work to do regarding the enforcement of this law.
The Romanian Association of Banks’s priorities pertain to maintaining the role of the banking sector as the main ﬁnancier of Romania’s economy, including via action to strengthen ﬁnancial discipline in order to assure the stability and credibility of the banking sector. The presentation before decision-makers of the challenges and solutions represents a sine qua non condition for the success in the transparent fundamenting of decisions that would lead to rebuilding trust. The legal acts should focus on the interests of the Romanian economy which means the interest of each citizen of Romania.
In decision-making, one should take into account that any pressure put on banks’ assets aﬀects the balance and the decision to allocate capital and ﬁnancing for lending. Actually, it aﬀects the whole economy.
At the same time, banks are accountable for millions of depositors. A capitalist economy cannot develop without a stable and solid banking sector that exercises the role of ﬁnancier of the economy.
The banking sector of Romania ﬁnances mainly the Romanian economy. Similarly, a banking system cannot perform and carry out fully its role if the economy is not healthy and if the players of the real economy exercise pressure on credit institutions’ balance sheets.
Over 80% of banks expect that the expenditure with credit risk provisions does not go up or even down (35%). At the same time, about 75% of banks are of the opinion that ﬁnancial results will improve.
On medium-term, a wide-scope consolidation in the banking sector is not deemed probable since 71% of banks expect a medium-scope consolidation and only 14% a wider-scope consolidation. The survey reveals the fact that credit institutions are interested rather in buying loans than in selling them. About 43% of banks take into account the acquisition of loan portfolios and merely 29% the selling of such assets. Of the latter, many refer to the practice – already common – of selling some relatively small portfolios of NPLs. Restructuring in the banking sector is drawing to an end, taking into account that 70% of banks will not reduce the number of their employees in the near future, while about 20% expect even an increase in the number of their staﬀ.
By eliminating the challenges facing the banking sector, especially the legal ones, consumers will be able to beneﬁt from banking services at more competitive prices and companies in Romania will be able to compete as eﬃciently as possible on foreign markets.