Lucian Croitoru, NBR:  Greek subsidiaries have no other problems than the other banks in the system

The problem of Greek subsidiaries in our country once again became the focus, after the fears that their parent banks will no longer have the ability to finance them intensified once again, as they are facing difficulties themselves.

The European Commission has recently approved the aid for the Greek banks, which have until the end of the month to implement their plans to increase their capital. The loan intended to recapitalize the Greek banks was granted by the Financial Stability Fund in Greece, as part of the banks' recapitalization plan.

Analyst Călin Rechea claims that those funds are insufficient, and that if the shareholders of the bank do not bring capital themselves, we can expect the nationalization of the banks.

Because the problems of the Greek banks are acute, it is out of the question for subsidiaries to expect support from their parent banks, the analyst says, who also warns that, if the connection between the two sides breaks, it will become impossible for the loans in the market, due to the lack of confidence which it will create.

Călin Rechea claims that the ratio between the loans granted and the deposits attracted by the domestic Greek banks, of about 250% (which means that loans significantly outweigh the resources attracted from foreign deposits) indicates a very high risk for the refinancing of the loan portfolios.

In fact the Greek branches have raised funding from the foreign financial markets to grant loans, and those loans, which have a 5-year maturity, are now getting closer to maturity, the analyst also says.

• Lucian Croitoru, NBR: The domestic branches of Greek banks have better liquidity ratios than other banks

The domestic branches of Greek banks have better liquidity ratios than those of other banks in the system, said Lucian Croitoru, the advisor to the governor of the NBR, Mugur Isărescu:

"Greek banks have no other problems than the other banks in the market.

Greek subsidiaries have their own plans, they are private businesses, we can't influence them.

If they won't be able to get money from their parent banks, they will have to borrow.

They have good liquidity ratios, even better than those of other banks in the system. Some of them have better capitalization than the average of the system, which is 14%.

These are private entities which have been profitable. Now they have reduced their profitability, but they are still interested in continuing their businesses.

I think that these banks will do all the necessary efforts and will find sources for financing, either from parent banks or from elsewhere".

All the banks all over the world are faced with problems, because they need to repay their debts and they are seeing non-performing loans, which led to the creation of loan provisions, thus causing their profits to drop, Lucian Croitoru says, and he added:

"This problem will endure for a few years. The main concern is to bring the balance sheets to a sustainable form. That is why they have slowed down lending, so they can get a good loan/deposit ratio, which needs to be close to 1.

That is why there is a recession, because the banks no longer grant loans".

Discussing the ratio between the granted loans and the deposits attracted by the domestic branches of the Greek banks, of approximately 250%, the official of the NBR declined to comment, but he said that across the system, that ratio stands at 120%. He said that even though this ratio has improved, the negative effect is the slowdown of lending, meaning that the money is no longer getting in the economy.

• Lucian Croitoru: The strategy of the Greek banks, to raise interest paid out on deposits, is a mistake

The advisor to the governor of the NBR does not agree to the raising of interest rates on deposits used by the Greek banks, reiterating the criticism of the NBR on that topic:

"What I thought was wrong about the Greek banks was that they raised the interest rates on deposits, in their struggle to attract resources".

The NBR warned banks to be careful with this kind of behavior, which will lead to higher costs, without any results".

The advisor of the governor said that there isn't such a high volume of resources as the ones which the banks are hoping to attract, by raising the interest rate paid out on deposits, and the interest expenses will need to be paid.