Central Bank: Credit risk, main vulnerability of banking sector

According to the Financial Stability Report on 2010 released on Tuesday by the National Bank (BNR), credit risk remains the main vulnerability of the banking sector. Companies' and households' capacity to properly service their debt is constrained by the prolonged and deep economic contraction, as well as the significant degree of indebtedness, in general, and high foreign currency-denominated debt, in particular, for some categories of borrowers. Financial stability remained resilient during 2009 and H1, on the background of increasing bank capitalization to comfortable levels, maintaining adequate liquidity and sustained provisioning efforts, the report shows.

Banking sector resilience and capacity to withstand shocks were also backed by the stress testing results to economic shocks, according to BNR's assessment. International macroeconomic developments and the ongoing domestic adjustments are important factors that put pressure on financial stability in the short term.

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