Moody's maintains negative outlook on banking sector in Romania

The financial evaluation agency Moody's Investors Service will probably maintain the negative outlook for the banking system in Romania for a long time, shows a report of Moody's Investors Service.

On March 1 Moody's announced that the outlook on the banking sector in Romania was negative, reflecting the difficult conditions of the local economy as a consequence of the global financial downturn. According to Moody's, in spite of a high risk profile, the banks in Romania have not been able so far to absorb different shocks and the support programme agreed on with the International Monetary Fund and with the European Union, and the new Government, which is concentrated on reforms, diminished macro-economic pressures.

The negative outlook that Moody's attributes to the Romanian banking system expresses the rating agency's vision on the probable direction the fundamental credit conditions in the Romanian banking industry are heading for over the next 12-18 months.

Moody's admits that, in spite of the difficult economic conditions, the support programme agreed on with the IMF and the EU, as well as the new Government, which is concentrated on reforms, did not only diminish macro-economic pressures, but also dissipated the fears regarding the liquidity and the solvency of the Romanian banking system.

Nevertheless, Moody's expects that the increase in credit and financing costs will continue to affect Romanian banks' profitability on a short and medium term, considering the difficult economic circumstances, while the level of non-performing loans may remain high, given their usual belated reaction to a possible economic re-launch.

Currently, Romania and Latvia are the only European Union member states not not benefit from a rating within the investment grade category. Romania benefits from a 'BB plus' rating from Standard & Poor's and Fitch Ratings, the only major rating agency that gives Romania an investment grade category rating (Baa3) being Moody's, Agerpres reports.