General Information & Client Service
  • Americas: +1.212.553.1653
  • Asia: +852.3551.3077
  • China: +86.10.6319.6580
  • EMEA: +44.20.7772.5454
  • Japan: +81.3.5408.4100
Media Relations
  • New York: +1.212.553.0376
  • London: +44.20.7772.5456
  • Hong Kong: +852.3758.1350
  • Tokyo: +813.5408.4110
  • Sydney: +61.2.9270.8141
  • Mexico City: +001.888.779.5833
  • Buenos Aires: +0800.666.3506
  • São Paulo: +0800.891.2518
June 06, 2018

IMF published its staff report and selected issues report under the 2018 Article IV consultation with Romania. Directors commended the improvements in the financial sector in recent years and examined the findings of the Financial Sector Assessment Program (FSAP). They called for strengthened macro-prudential policies to address emerging vulnerabilities from the exposure of banks to the government and the real estate sectors. They supported enhancing supervisory practices and the crisis management framework.

The staff report noted that, in line with the FSAP recommendations, the authorities are encouraged to continue strengthening the anti-money laundering and combating the financing of terrorism (AML/CFT) framework in compliance with the Financial Action Task Force (FATF) standards. The report highlighted that the resilience and profitability of the banking sector has improved in recent years. Moreover, profitability and liquidity positions of banks have strengthened. Non-performing loans (NPLs) declined significantly, reflecting the proactive efforts of the National Bank of Romania (NBR) to encourage NPL sales and write-offs. However, vulnerabilities arise from the high exposure of banks to the real estate sector and sovereign debt. The mortgage contracts expose banks to credit risks in the event of sharp increases in interest rates. The effectiveness of existing macro-prudential tools on mortgages is undermined by the Prima Casa program, which allows loan-to-value ratios of up to 95%.

Staff warned against legislative initiatives that could harm the financial system. Several recent initiatives would, if enacted, reduce the amount of credit provided to the real economy and slow the resolution of NPLs, thus adversely affecting financial stability. This includes the proposed caps on interest rates for household lending and several measures that adversely affect the functioning of the market for NPLs, such as allowing individuals to repurchase debt from debt collectors at a legislated maximum amount. NBR agreed with the main vulnerabilities identified by the ongoing FSAP and welcomed its recommendations. Initial steps have been taken to implement most of the FSAP recommendations. Implementing the FSAP recommendations will help to further improve the resilience of the banking sector. Drawing on the conclusions of the ongoing FSAP, staff recommended certain macro-prudential policies to address these vulnerabilities.

  • A debt-service-to-income (DSTI) limit on mortgage lending would mitigate risks from the exposure of banks to the real estate sector.
  • Carefully calibrated capital surcharges could address vulnerabilities from sovereign exposures.
  • Capital surcharges—preferably the systemic risk buffer—should be calibrated carefully to increase the resilience of the banking system while avoiding unintended market impact. 
  • The National Committee for Macro-prudential Oversight (NCMO) should strengthen its accountability framework. Staff welcomed recent steps in this direction, including developing a common assessment of systemic risk at each NCMO meeting and publicly disclosing the proposed policy actions and voting distribution.

The assessment also revealed that supervisory practices and the crisis management framework need bolstering. The processes supporting banks’ supervisory review should be further developed and the framework for Emergency Liquidity Assistance should be finalized and implemented. Aligning provisioning regimes across banks and non-bank financial lenders (NBFLs) is also recommended. In addition, the selected issues report reviews the level and structure of tax revenues in Romania, analyzes the growth-friendliness and efficiency of its tax structure, and proposes options to improve revenue mobilization drawing from the experiences of other countries.

Related Links

Keywords: Europe, Romania, Banking, NPLs, Article IV, FSAP, Macro-prudential Policy, Systemic Risk, IMF

Related Articles

EBA Publishes Reports Monitoring the Implementation of Basel III in EU

EBA published two reports measuring the impact of implementing the final Basel III reforms and monitoring the implementation of liquidity measures in EU.

March 20, 2019 WebPage Regulatory News

BCBS Publishes Results of Survey on Proportionality in Bank Regulation

BCBS published a report presenting the results of a survey conducted on proportionality practices in bank regulation and supervision.

March 19, 2019 WebPage Regulatory News

US Agencies Adopt Interim Rule to Facilitate Transfers of Legacy Swaps

US Agencies (FCA, FDIC, FED, FHFA, and OCC) are adopting and inviting comments on an interim final rule.

March 19, 2019 WebPage Regulatory News

EIOPA Requests Data on LTG Measures from Insurers Under Solvency II

EIOPA has requested the European Economic Area insurance undertakings, which are subject to Solvency II, to provide information on the long-term guarantee (LTG) measures.

March 18, 2019 WebPage Regulatory News

PRA Proposes Reporting Amendments to Pillar 2 Liquidity Framework

PRA proposed (CP6/19) regulatory reporting amendments and clarifications to the Pillar 2 liquidity framework for banks in UK.

March 18, 2019 WebPage Regulatory News

EBA Single Rulebook Q&A: Third Update for March 2019

EBA published answers to seven questions under the Single Rulebook question and answer (Q&A) updates for this week.

March 15, 2019 WebPage Regulatory News

OCC Updates Recovery Planning Booklet of the Comptroller's Handbook

OCC updated the Recovery Planning booklet of the Comptroller’s Handbook.

March 15, 2019 WebPage Regulatory News

CFTC and MAS Announce Mutual Recognition of Derivatives Trading Venues

CFTC and MAS announced the mutual recognition of certain derivatives trading venues in the U.S. and Singapore.

March 15, 2019 WebPage Regulatory News

EBA Publishes Report on Convergence of Supervisory Practices Across EU

EBA published annual report on the convergence of supervisory practices in EU.

March 14, 2019 WebPage Regulatory News

CPMI-IOSCO Publish Update to Level 1 Assessment of PFMI Implementation

CPMI and IOSCO jointly updated the Level 1 Assessment Online Tracker on monitoring of the implementation of the Principles for financial market infrastructures (PFMI).

March 14, 2019 WebPage Regulatory News
RESULTS 1 - 10 OF 2763