Austria takes a concerned look at Romanian banking system, as a result of worsening loan portfolios

The Eastern European money-searching tour of Austrian Finance minister Josef Proll has been labelled a failure according to the Austrian press.

The Austrian media writes that, if 10% of BCR's portfolio were to become bad debt, the bank should receive help from its majority shareholder Erste Bank, or else it would go bankrupt.

The quality of loan portfolios in the banking system has already worsened considerably. At the end of last year, the share of loans and interests rated as doubtful and loss rose to more than 6.5% of the total loans and interests registered by banks, which is 2.5% more than in December 2007, according to the NBR data. Bad debt reached 3.38% of the total banking equity capitals, while its share of the total assets stood at 0.34%.
 
Eastern European countries, Romania included, could lead Austria to bankruptcy, as the Austrian banks cannot bear the losses of their branches in the region by themselves, and the state would be forced to step in, Austrian publication Profil was quoted as saying by Mediafax.

The Austrians, noting the significant volatility of the currencies in the region against the euro wonder, "If the state bails out the banks, who will bail out the state?" Austrian groups dominate the Romanian banking system, as they control BCR, Raiffeisen, Volksbank and UniCredit-Tiriac Bank, some of the biggest local banks.

At the end of last week, the Austrian Finance minister met with Romanian Finance minister Gheorghe Pogea and with central bank Governor Mugur Isarescu.

At the end of his visit in Romania, Proll explained banks needed to receive local support cash-wise and local authorities needed to ensure monetary stability.

On the other hand, he said the local subsidiaries of the Austrian banks would indirectly benefit from the 100bn-euro bailout scheme implemented by Austria.

Ziarul Financiar