Foreign Banks Pledge To Keep Doing Business In Romania

Andreea ArĂboaei

Foreign-owned banks having subsidiaries in Romania have decided that "the current good financial standing will be preserved throughout the period of market turbulences and economic slowdown" following discussions in Vienna among the parent banks, representatives of international financial institutions and the National Bank of Romania (BNR), according to a BNR press release.

Another conclusion was that "a need for additional capital cannot be excluded, and will be provided as necessary," in order to better adapt the subsidiaries to the current economic conditions.

This way, the parent banks intend to "demonstrate our long-term commitment to the development of the Romanian economy" and "willingness to contribute to the efforts of the international community to put in place a comprehensive and well-coordinated response to the crisis," the BNR press release further indicates.

The said commitments and decisions were signed by Erste Bank, Raiffeisen International, Eurobank EFG, National Bank of Greece, Unicredit, Societe Generale, Alpha Bank, Volksbank and Piraeus Bank.

"We have taken note of the agreement reached between the IMF and the BNR to run stress-tests based on established IMF methodology to estimate the potential losses that the Romanian banks might face under diverse scenarios during the period of the IMF/EU program. (...) We are therefore prepared to make these commitments, within the framework of the multilateral support programs, on a bilateral basis with the BNR, and with the involvement of our home country supervisory authorities, according to European and the respective national regulatory frameworks," the press release reads.

The meeting was chaired by the International Monetary Fund and attended by the European Commission, the World Bank, the European Bank for Reconstruction and Development, the European Investment Bank, the European Central Bank, the National Bank of Romania and the supervisory authorities and Finance Ministries of Austria, France, Greece and Italy.

The attending banks welcomed Romania"s decision to take a loan from the IMF, the EC and the World Bank and described it as an "important development that will ensure the consolidation of macro-economic and financial stability in Romania." The banks further reiterated their commitment to continue operations in Romania: "We are aware that it is in our collective interest and in the interest of Romania for all of us to subscribe to coordinated commitments to maintain our overall exposure to Romania."

"We entered the Romanian market as strategic investors and key contributors to its transition toward an open, market-based economy, based on our assessment of and continued confidence in the country"s long-term growth prospects. We have made substantial investments in Romania over a number of years, and we remain committed to doing business in the country.

The meeting in Vienna was intended to produce an agreement of the parent banks of foreign-owned Romanian banks not to reduce their exposure in Romania upon the reduction of the minimum mandatory reserves set by the BNR. The reduction will take place "extremely gradually", according to Governor Mugur Isarescu, from the current 40%, as the 12.95 billion EUR taken from the IMF will augment BNR"s reserves and allow for such reduction.