Radu Gheţea: New players may enter the banking market

The Romanian banking system will most likely change its structure in the next two years, following potential mergers and acquisitions which may occur in the coming two years, as well as by having new players enter the market, said Radu Gheţea, the president of CEC Bank and of the Romanian Banking Association.

"I think that we could see new banks enter the Romanian market. There is talk of Chinese, Arab, German banks ... My opinion is that the potential of the Romanian market is what is could drive these new entries, which will occur either from scratch, either through mergers and acquisitions", the president of the Romanian Banking Association said.

• "Demand for loans has increased, but just five applications out of ten are bankable"

Even though demand for loans has increased compared to last summer, just 5 applications out of ten are bankable, Radu Ghetea said, and he added: "This is particularly true when speaking of individuals and SMEs. In the case of major corporations, the ratio may exceed 5 out of 10".

The main problem for companies is the shrinking value of their collateral, "regardless of whether we are talking about plants, homes, or plots of land for which there is no market anymore", the president of the Romanian Banking Association says.

On the other hand, companies" financial ratios have seen dramatic drops.

"The companies" financial statements aren"t looking well at all, after the years of crisis. There are dramatic drops of the financial ratios. Under these circumstances, it is very difficult taking on risks, especially since the markets are uncertain, and the cashflow of companies, as well as the future value of guarantees are not always easy to predict. It is a general phenomenon, which isn"t happening just in the case of CEC Bank".

On the other hand, individuals that still have salary related issues, which "are not what they were two years ago", and the value of collateral remains low.

• No news on the tightening of foreign currency loans, announced by the NBR

Even though there were numerous discussions in the press, following the announcement launched by the governor of the Romanian National Bank, Mugur Isărescu, concerning the tightening of lending conditions for loans denominated in foreign currencies, nothing more has been heard on the subject.

"There were some talks around this subject in the press, but the Romanian Banking Association did not receive any official document. Therefore, I can"t comment on this matter", said Radu Gheţea.

Another topic launched by the governor of the NBR, was the very high level of interest rates in lei, which he considers too big, after the policy rate was cut to 6.25% a year.

"Cash is still very expensive. We are talking about interest rates that we are working with, which are tied to the market.

The monetary policy rate is one thing, the interest paid on the Mandatory Monetary Reserves is another, as is the interest rate that money owners demand ...We will never see the situation where the policy rate will be the only indicator of the interest rate for loans. The policy rate is just one of the elements taken into consideration, but not the only one", said Radu Gheţea.

• Gheţea: "I"ve never had a good opinion when it comes to rating agencies"

Lately, a controversial issue has been the policy of rating agencies, which according to some, are merely pouring gas on the fire through the statements that they are making about the countries of the world, as well as concerning some banks.

The president of CEC Bank says: "I"ve never had a good opinion about rating agencies, because of situations they created, which involved Romania itself. One of them occurred in `99, when ratings agencies rushed to cut our rating, in connection with the crash of the stock markets of Southern Asia, which were tied to Russia ...And somebody must have said Russia, Romania, they"re nearby ...and both their names start with an "R"...Romania"s foreign trade with Russia, at the time, was somewhere near zero, and yet, Romania"s rating was cut".

Radu Gheţea says that he is upset by the opinions formulated by people at the ratings agencies who have never left their office, based on information that reached them indirectly, "which ricocheted from some other people". "It seems we can"t live without this rating system, but I for one don"t like it and I don"t trust it too much", the president of CEC Bank said.