Transcript www.bankofgreece.gr
1
OVERVIEW
I. Recent banking sector developments II. Policy responses to the financial crisis
II.1. Proactive measures undertaken by the National Bank of Romania for mitigating the effects of the financial crisis II.2. The IMF Stand-By Arrangement – actions for further strengthening of the financial sector
III. The perspectives of lending
NATIONAL BANK OF ROMANIA
2
I. Recent banking sector developments
NATIONAL BANK OF ROMANIA
3
100 50 0
Evolution of Domestic Credit
250 200
(in real terms)
RON billion, end of period loans to the private sector loans to the government sector total 150
Source: National Bank of Romania
NATIONAL BANK OF ROMANIA
4
Financial Intermediation*
percent 45 40 35 loans to non-financial corporations a.o.
loans to households foreign-exchange-denominated loans RON-denominated loans 30 26.8
25 20.7
20 12.7
16.6
15.4
15 13.3
11.3
11.8
10.24
10 5 11.4
6.34
7.4
9.4
4.8
0 2004 2005 2006
Source: National Bank of Romania, National Institute of Statistics
14.1
35.9
18.6
19.5
NATIONAL BANK OF ROMANIA
17.3
16.4
19.6
19.7
39.3
22.7
16.6
2007 2008 *) loans to the private sector / GDP 5
Loans to Private Sector
120 real annual percentage change* RON-denominated loans 100 80 total foreign-exchange denominated loans real annual percentage change* 120 households total non-financial corporations 100 80 60 40 60 40 20 0 20 0
Source: National Bank of Romania, National Institute of Statistics
NATIONAL BANK OF ROMANIA
*) based on CPI 6
Non-Financial Corporations' Loans and Deposits
10 20 30 40 50 60 30 20 10 0 70 60 50 40 RON billion RON-denominated deposits foreign-exchange-denominated deposits net position, RON 2004 2005 2006 RON-denominated loans foreign-exchange-denominated loans net position, FX 2007 2008 RON billion 10 20 30 40 50 60 30 20 10 0 70 60 50 40 Mar.
2009
Source: National Bank of Romania
NATIONAL BANK OF ROMANIA
7
Households' Loans and Deposits
RON billion 60 50 40 30 20 10 0 10 20 30 40 50 60 70 RON-denominated deposits foreign-exchange-denominated deposits net position, RON 80 2004 2005
Source: National Bank of Romania
2006 RON billion RON-denominated loans foreign-exchange-denominated loans net position, FX 60 50 40 30 20 50 60 70 80 10 0 10 20 30 40 2007 2008 Mar.
2009
NATIONAL BANK OF ROMANIA
8
Interest Rates in the Banking System
35 percent per annum 30 25 20 15 10 5 0 percent per annum 35 30 25 20 15 10 5 0 NBR policy rate NBR interest rate on flow of sterilization operations (deposit taking, reverse repo, CDs) new RON-denominated loans to non-financial corporations and households new RON-denominated time deposits from non-financial corporations and households
Source: National Bank of Romania
NATIONAL BANK OF ROMANIA
9
1.4
percent 1.2
1.0
0.8
0.6
0.4
21.1
15.6
0.31
0.2
0.0
-0.2
2.2
Analysis Ratios for the Banking System
20.6
15.6
0.28
2.0
percent overdue and doubtful loans /total loans portfolio (net value) solvency ratio (>8%)*; rhs ROE (net income / total equity); rhs ROA (net income / total assets); rhs 21.1
18.1
18.1
0.66
13.8
12.7
12.3
12.0
10.2
9.4
0.35
0.26
0.20
0.22
35 30 25 20 15 10 5 -0.3
1.6
1.3
1.0
1.7
0 -2.9
-5 * Starting with 2007, according to Regulation No.13/2006 and Order No.12/2007; (>12%) until end-2006.
Source: National Bank of Romania
NATIONAL BANK OF ROMANIA
10
II. Policy response to the financial crisis
II.1. Proactive measures undertaken by the National Bank of Romania for mitigating the effects of the financial crisis
NATIONAL BANK OF ROMANIA
11
Effects of the Global Financial Crisis on Romania from the Lending Perspective Risk aversion of foreign investors relative to emerging economies => decline in foreign investments
Confidence channel Financial channel
Diminished access to external financing => impact on lending volume, especially FX loans Deterioration of households’ and companies’ net assets because of FX loans debt service increase and reduction in asset prices
Wealth and balance sheet channel Global financial crisis Exchange rate channel
Lower foreign currency inflows => downward pressure on the RON NATIONAL BANK OF ROMANIA
12
II.1. Proactive Measures by the NBR since September 2008 when the Crisis Emerged (1)
a. Liquidity management and money market functioning measures
Use of lending facility, FX swaps and repo operations Minimum reserve requirement reduction: • for RON-denominated liabilities from 20% to 18% => starting with Nov. 2008 • for FX-denominated liabilities with residual maturities of over 2 years from 40% to 0% => starting with May 2008 Amending rules for interbank interest rates
b. Interest rate decisions (monetary policy rate)
Feb. 2008 => rate cut from 10.25% to 10% May 2009 => rate cut from 10% to 9.5%
NATIONAL BANK OF ROMANIA
13
II.1. Proactive Measures by the NBR since September 2008 when the Crisis Emerged (2)
c. Supervisory actions
Liquidity:
Strengthening of bank liquidity monitoring Recommendations to diversify financing resources Request for alternative financing arrangements etc.
Solvency:
Strengthening of solvency monitoring Requests for capital increases Requests for maintaining solvency ratios above minimum level of 8% etc.
Lending:
Recommendations to reduce sectoral concentrations Requirements to improve banks’ risk management frameworks etc.
d. Regulatory actions
Simplify mortgage lending rules
(NBR Regulation 2/2009)
Adapt provisioning requirements for loans overdue for more
than 90 days
(NBR Regulation 3/2009)
Allow for interim profit to be included in own funds
(NBR/NSC Regulation 6/3/2009) etc.
NATIONAL BANK OF ROMANIA
14
II. Policy response to the financial crisis
II.2. The IMF Stand-By Arrangement – actions for further strengthening of the financial sector
NATIONAL BANK OF ROMANIA
15
The International Financing Arrangement for Romania
• • •
The total size of the support is EUR 20 billion (2009-2011):
IMF Stand-By Arrangement of EUR 12.95 bn. EU balance of payments financing facility of EUR 5 bn.
World Bank, EBRD commitments of EUR 2 bn.
The program aims to cushion the effects of a sharp drop in private capital inflows and to facilitate an orderly adjustment of the external deficit, thus easing excessive pressures on the exchange rate
1.
2.
3.
4.
To attain these objectives, the program intends to:
strengthen fiscal policy bring inflation within the NBR’s target range
maintain it there and
maintain adequate bank capitalization and liquidity secure adequate external financing confidence
.
and
improve
NATIONAL BANK OF ROMANIA
16
Rationale for Banking System Actions
Strengths
Banking system is sound and well capitalized The parents of the main banks operating in Romania have pledged any support necessary for their subsidiaries, committing to maintaining their global exposures to Romania and to recapitalizing subsidiaries
Challenges
The macroeconomic environment is difficult, including from the perspective of the economic downturn The global economic and financial outlook is still negative, which maintains the investors’ uncertainty and risk aversion
Need for actions aimed at further strengthening the banking system
NATIONAL BANK OF ROMANIA
17
Main Actions Part of the Stand-by Arrangement (1)
I.
Maintain a strong capitalization of the banking system on the medium term
Banks are required to secure by 30 September 2009 sufficient resources to ensure solvency ratios above 10%
II.
Improve the capacity to respond in a timely and effective fashion in the event of bank distress
Strengthen the special administrator’s ability to deal with banks in weak financial positions NBR’s will be empowered to request that significant shareholders financially support the bank and to prohibit or limit profit distribution Other legal amendments: simplify and strengthen the court based proceedings for winding-up of banks
NATIONAL BANK OF ROMANIA
18
V.
Main Actions Part of the Stand-by Arrangement (2)
III.
Ensure the confidence in the banking system
RDGF will have access to government privatization receipts Deposit insurance payment period will be shortened to 20 working days
IV.
Continuously improve the supervision and regulation framework
Improve bank liquidity regulations Raise minimum level of the capital adequacy ratio from 8% to 10% Adopt International Financial Reporting Standards (IFRS)
Promote some measures to ease the debt servicing by borrowers during the crisis
Seek an agreement with commercial banks to facilitate the restructuring of household debt contracted in foreign currency
NATIONAL BANK OF ROMANIA
19
Main Actions Part of the Stand-by Arrangement (3)
“Vienna Initiative”
The continuing involvement of foreign banks in Romania enhances the successful implementation of the macroeconomic reform program
On March 26 in Vienna,
the parent banks of the nine largest foreign banks (from Austria, Greece, France and Italy) operating in Romania have committed to: – – maintain their overall exposure to our country and increase the capital of their subsidiaries as needed A follow up meeting was held on
May 19 in Brussels
commitment letters in the coming weeks to fulfill the objectives agreed upon in Vienna. , when the nine parent banks agreed to submit specific bilateral
NATIONAL BANK OF ROMANIA
20
III. The perspectives of lending
NATIONAL BANK OF ROMANIA
21
Measures Already Undertaken and Those Announced Started Improving Fundamentals
Increased confidence in Romania Sound macroeconomic and financial sector policies are creating strong fundamentals for lending revitalization
NATIONAL BANK OF ROMANIA
22
Confidence Effect: Spreads on Eurobonds (German Benchmark) Have Decreased Significantly
800 700 600 500 400 300 200 100 0 B ulg aria H ung ary P oland R omania (rhs ) Turk ey (rhs ) 1200 1000 800 600 400 200 0
NATIONAL BANK OF ROMANIA
23
The Perspectives of Lending (1)
NBR is prepared to undertake further measures which will have a positive effect on bank lending, including a gradual ease of the reserve requirements if monetary and macroeconomic conditions have favorable developments
The external financing from IFIs will increase the availability of funds in the economy, which will encourage lending expansion
However much will depend on how the supply and the demand for loans will adjust to the new conditions
NATIONAL BANK OF ROMANIA
24
The Perspectives of Lending (2)
Supply of loans
Bank lending will resume, although the pace of growth will be slower than that recorded previously (e.g. 2007) A downward adjustment is expected for deposit interest rates, which will also push down lending interest rates The banks will undergo a restructuring process following increasing pressure on profitability and from competitors
Demand for loans
The decreasing cost of borrowing will stimulate the demand for loans Any measures supportive of borrowing, such as supplementing the capacity of guaranteeing the loans will be beneficial Confidence will increase as economic prospects improve
NATIONAL BANK OF ROMANIA
25