Banks externalized loans worth €17 bln in 2006-2008

The volume of loans externalized by banks in the 2006-2008 period amounts to 35 percent of the loan balance registered at the end of last year. According to data released by the National Bank of Romania (BNR), the non-governmental loan amounted to €49.7 billion by 31 December 2008. Thus, the value of externalized loan portfolio amounts to some €17.4 billion.

The practice of externalizing loans was not a common one in the local banking system prior to 2006, according to a declaration by BNR sources for Business Standard. "Banks kept externalizing loans in the first quarter of this year as well. Generally, banks externalized quality loans," sources said. Some 88 percent of total assets in the local banking system are controlled by foreign groups. Some 10 lenders are externalizing loans to their mother-banks, especially on the corporate segment, sources added.

Lenders chose to send significant amounts of their loan portfolios to mother-banks in order to avoid costly measures imposed by local regulations, such as cash reserve ratio (CRR), which amounts to 40 percent of euro liabilities and 18 percent for lei liabilities. However, as of this year, BNR removed the CRR for financing with more than two-year maturity.

The General Manager of ING Bank Romania, Misu Negritoiu, told NewsIn that the CRR cut will persuade lenders to repatriate the externalized loans. No more than 15 percent of these loans are worrisome, he added.

Business Standard