Moody's by shuifanglj

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									NATIONAL BANK OF ROMANIA   1
OVERVIEW

I. Recent developments of lending

II. Policy responses to the financial crisis

     II.1. Proactive measures undertaken by the National Bank of
         Romania for mitigating the effects of the financial crisis

     II.2. The IMF Stand-By Arrangement – actions for further
         strengthening of the financial sector

III. The perspectives of lending



                    NATIONAL BANK OF ROMANIA                          2
I. Recent developments of lending in Romania




              NATIONAL BANK OF ROMANIA         3
                                                                    Evolution of Domestic Credit
                                                                                             (in real terms)
                                                    RON billion, end of period
                                     250
                                                             loans to the private sector
                                                             loans to the government sector
                                                             total
 (deflated by CPI, March 2009=100)




                                     200



                                     150



                                     100



                                      50



                                       0
                                                                  Jun.06




                                                                                                      Jun.07




                                                                                                                                          Jun.08
                                                                           Sep.06




                                                                                                               Sep.07




                                                                                                                                                   Sep.08
                                                        Mar.06




                                                                                             Mar.07




                                                                                                                                 Mar.08




                                                                                                                                                                     Mar.09
                                           Dec.05




                                                                                    Dec.06




                                                                                                                        Dec.07




                                                                                                                                                            Dec.08
Source: National Bank of Romania

                                                                                NATIONAL BANK OF ROMANIA                                                                      4
                                  Financial Intermediation*
      percent
45
                   loans to non-financial corporations a.o.                                               39.3
40                 loans to households
                                                                                  35.9
                   foreign-exchange-denominated loans
35
                   RON-denominated loans
30                                                                                                    19.6
                                                             26.8                                             22.7
                                                                               18.6    19.5
25
                                   20.7
20                                                                   12.7
                                                         15.4
         16.6
15                                        11.3
                               13.3
      11.8   10.24
10                                                                                                    19.7
                                                                                17.3 16.4                     16.6
                                                                     14.1
 5                                                       11.4
                                          9.4
                6.34            7.4
      4.8
 0
     2004                      2005                      2006                   2007                   2008
Source: National Bank of Romania, National Institute of Statistics          *) loans to the private sector / GDP

                                       NATIONAL BANK OF ROMANIA                                                      5
                                                                                Loans to Private Sector
          real annual percentage change*                                                                                                                           real annual percentage change*
120                                                                                                                                                                                                                                                        120
                                                             RON-denominated loans                                                                               households
                                                             total                                                                                               total
100                                                                                                                                                                                                                                                        100
                                                                                                                                                                 non-financial corporations
                                                             foreign-exchange-
                                                             denominated loans
  80                                                                                                                                                                                                                                                       80


  60                                                                                                                                                                                                                                                       60


  40                                                                                                                                                                                                                                                       40


  20                                                                                                                                                                                                                                                       20


   0                                                                                                                                                                                                                                                       0
                                                                                                                                               Jun.06




                                                                                                                                                                                   Jun.07




                                                                                                                                                                                                                       Jun.08
                                                                                                                                                        Sep.06




                                                                                                                                                                                            Sep.07




                                                                                                                                                                                                                                Sep.08
                                                                                                                                      Mar.06




                                                                                                                                                                          Mar.07




                                                                                                                                                                                                              Mar.08




                                                                                                                                                                                                                                                  Mar.09
                         Jun.06




                                                              Jun.07




                                                                                                  Jun.08




                                                                                                                             Dec.05




                                                                                                                                                                 Dec.06




                                                                                                                                                                                                     Dec.07




                                                                                                                                                                                                                                         Dec.08
                                  Sep.06




                                                                       Sep.07




                                                                                                           Sep.08
                Mar.06




                                                    Mar.07




                                                                                         Mar.08




                                                                                                                             Mar.09
       Dec.05




                                           Dec.06




                                                                                Dec.07




                                                                                                                    Dec.08




Source: National Bank of Romania, National Institute of Statistics                                                                                                                                                      *) based on CPI

                                                                                NATIONAL BANK OF ROMANIA                                                                                                                                                         6
     Non-Financial Corporations' Loans and Deposits

      RON billion                                                                    RON billion
70                                                                                                 70
        RON-denominated deposits                RON-denominated loans
60                                                                                                 60
        foreign-exchange-denominated deposits   foreign-exchange-denominated loans
50      net position, RON                       net position, FX                                   50
40                                                                                                 40
30                                                                                                 30
20                                                                                                 20
10                                                                                                 10
 0                                                                                                 0
10                                                                                                 10
20                                                                                                 20
30                                                                                                 30
40                                                                                                 40
50                                                                                                 50
60                                                                                                 60
     2004             2005            2006           2007           2008              Mar.
                                                                                      2009
Source: National Bank of Romania

                                   NATIONAL BANK OF ROMANIA                                             7
                     Households' Loans and Deposits

      RON billion                                                               RON billion
60                                                                                            60
50                                                                                            50
40                                                                                            40
30                                                                                            30
20                                                                                            20
10                                                                                            10
 0                                                                                            0
10                                                                                            10
20                                                                                            20
30                                                                                            30
40                                                                                            40
50                                                                                            50
60       RON-denominated deposits                RON-denominated loans                        60
         foreign-exchange-denominated deposits   foreign-exchange-denominated loans
70                                                                                            70
         net position, RON                       net position, FX
80                                                                                            80
     2004             2005            2006        2007            2008           Mar.
Source: National Bank of Romania                                                 2009

                                   NATIONAL BANK OF ROMANIA                                        8
                                 Interest Rates in the Banking System

         percent per annum                                                                                                                                     percent per annum
35                                                                                                                                                                                                          35

30                                                                                                                                                                                                          30

25                                                                                                                                                                                                          25

20                                                                                                                                                                                                          20

15                                                                                                                                                                                                          15

10                                                                                                                                                                                                          10

 5                                                                                                                                                                                                          5

 0                                                                                                                                                                                                          0
                       Jul.04




                                                            Jul.05




                                                                                                Jul.06




                                                                                                                                    Jul.07




                                                                                                                                                                        Jul.08
              Apr.04




                                                   Apr.05




                                                                                       Apr.06




                                                                                                                           Apr.07




                                                                                                                                                               Apr.08




                                                                                                                                                                                                   Apr.09
     Jan.04




                                          Jan.05




                                                                              Jan.06




                                                                                                                  Jan.07




                                                                                                                                                      Jan.08




                                                                                                                                                                                          Jan.09
                                 Oct.04




                                                                     Oct.05




                                                                                                         Oct.06




                                                                                                                                             Oct.07




                                                                                                                                                                                 Oct.08
                                NBR policy rate
                                NBR interest rate on flow of sterilization operations (deposit taking, reverse repo, CDs)
                                new RON-denominated loans to non-financial corporations and households
                                new RON-denominated time deposits from non-financial corporations and households
Source: National Bank of Romania


                                                                NATIONAL BANK OF ROMANIA                                                                                                                         9
                    Analysis Ratios for the Banking System

       percent                                                                                percent
 1.4                                                                                                     35
                                      overdue and doubtful loans /total loans portfolio (net value)
                                      solvency ratio (>8%)*; rhs
 1.2                                                                                                     30
                                      ROE (net income / total equity); rhs
                                      ROA (net income / total assets); rhs
 1.0                                                                                                     25
         21.1           20.6         21.1
 0.8                                              18.1                         18.1                      20
           15.6                                                                              0.66
                            15.6                                 13.8
 0.6                                     12.7                                 12.3           12.0        15
                                                    10.2        9.4
 0.4                                                                           0.35                      10
          0.31          0.28          0.26
                                                   0.20          0.22
 0.2                                                                                                     5
                                                                                              -0.3
 0.0       2.2          2.0           1.6           1.3                         1.7                      0
                                                                  1.0
                                                                                                  -2.9
-0.2                                                                                                     -5
           Dec.03




                         Dec.04




                                       Dec.05




                                                     Dec.06




                                                                  Dec.07




                                                                                Dec.08




                                                                                              Mar.09
* Starting with 2007, according to Regulation No.13/2006 and Order No.12/2007; (>12%) until end-2006.
 Source: National Bank of Romania

                                   NATIONAL BANK OF ROMANIA                                                   10
II. Policy response to the financial crisis

     II.1. Proactive measures undertaken by the National
     Bank of Romania for mitigating the effects of the
     financial crisis




                  NATIONAL BANK OF ROMANIA                 11
  Effects of the Global Financial Crisis on Romania from
                  the Lending Perspective
Risk aversion                                          Diminished
of foreign                                             access to
investors                                              external
                                                       financing =>
relative to
                                                       impact on
emerging                                               lending
economies =>        Confidence           Financial     volume,
decline in           channel              channel      especially FX
foreign                                                loans
investments
                                  Global
Deterioration of
                                 financial
households’                        crisis
and companies’
net assets                                               Lower foreign
                    Wealth and                           currency
because of FX                          Exchange rate
loans debt         balance sheet                         inflows =>
                                          channel
service increase      channel                            downward
and reduction in                                         pressure on
asset prices                                             the RON

                      NATIONAL BANK OF ROMANIA                           12
II.1. Proactive Measures by the NBR since September 2008
                 when the Crisis Emerged (1)

a. Liquidity management and money market functioning
   measures
    Use of lending facility, FX swaps and repo operations
    Minimum reserve requirement reduction:
       • for RON-denominated liabilities from 20% to 18% => starting
         with Nov. 2008
       • for FX-denominated liabilities with residual maturities of over 2
         years from 40% to 0% => starting with May 2008
    Amending rules for interbank interest rates

b. Interest rate decisions (monetary policy rate)
    Feb. 2008 => rate cut from 10.25% to 10%
    May 2009 => rate cut from 10% to 9.5%
                      NATIONAL BANK OF ROMANIA                               13
II.1. Proactive Measures by the NBR since September 2008
                 when the Crisis Emerged (2)
c. Supervisory actions
   Liquidity: Strengthening of bank liquidity monitoring
               Recommendations to diversify financing resources
               Request for alternative financing arrangements etc.
   Solvency: Strengthening of solvency monitoring
               Requests for capital increases
               Requests for maintaining solvency ratios above
               minimum level of 8% etc.
   Lending: Recommendations to reduce sectoral concentrations
              Requirements to improve banks’ risk management
              frameworks etc.
d. Regulatory actions
   Simplify mortgage lending rules (NBR Regulation 2/2009)
   Adapt provisioning requirements for loans overdue for more
    than 90 days (NBR Regulation 3/2009)
   Allow for interim profit to be included in own funds (NBR/NSC
    Regulation 6/3/2009) etc.
                      NATIONAL BANK OF ROMANIA                       14
II. Policy response to the financial crisis

     II.2. The IMF Stand-By Arrangement – actions for
     further strengthening of the financial sector




                  NATIONAL BANK OF ROMANIA              15
            Rationale for Banking System Actions

           Strengths                           Challenges
Banking system is sound and       The macroeconomic
well capitalized                   environment is difficult, including
                                   from the perspective of the
The parents of the main banks
                                   economic downturn
operating in Romania have
pledged any support necessary The global economic and
for their subsidiaries, committing financial outlook is still negative,
to maintaining their global        which maintains the investors’
exposures to Romania and to        uncertainty and risk aversion
recapitalizing subsidiaries


      Need for actions aimed at further strengthening the
                        banking system

                      NATIONAL BANK OF ROMANIA                            16
Main Actions Part of the Stand-by Arrangement (1)
I.    Maintain a strong capitalization of the banking system
      on the medium term
     Banks are required to secure by 30 September 2009
      sufficient resources to ensure solvency ratios above 10%

II.   Improve the capacity to respond in a timely and
      effective fashion in the event of bank distress
     Strengthen the special administrator’s ability to deal with
      banks in weak financial positions
     NBR’s will be empowered to request that significant
      shareholders financially support the bank and to prohibit or
      limit profit distribution
     Other legal amendments: simplify and strengthen the court-
      based proceedings for winding-up of banks


                     NATIONAL BANK OF ROMANIA                        17
 Main Actions Part of the Stand-by Arrangement (2)
III.   Ensure the confidence in the banking system
      RDGF will have access to government privatization receipts
      Deposit insurance payment period will be shortened to 20 working
       days

IV.    Continuously improve the supervision and regulation
       framework
      Improve bank liquidity regulations
      Raise minimum level of the capital adequacy ratio from 8% to 10%
      Adopt International Financial Reporting Standards (IFRS)
V.     Promote some measures to ease the debt servicing by
       borrowers during the crisis
      Seek an agreement with commercial banks to facilitate the
       restructuring of household debt contracted in foreign currency

                        NATIONAL BANK OF ROMANIA                          18
Main Actions Part of the Stand-by Arrangement (3)
                      “Vienna Initiative”


    The continuing involvement of foreign banks in Romania
     enhances the successful implementation of the
     macroeconomic reform program

    On March 26 in Vienna, the parent banks of the nine
     largest foreign banks (from Austria, Greece, France and
     Italy) operating in Romania have committed to:
      –     maintain their overall exposure to our country and
      –     increase the capital of their subsidiaries if needed.



                    NATIONAL BANK OF ROMANIA                        19
III. The perspectives of lending




               NATIONAL BANK OF ROMANIA   20
    Measures Already Undertaken and Those Announced
              Started Improving Fundamentals



     Increased confidence in Romania
     Sound macroeconomic and financial sector
      policies


are creating strong fundamentals for
lending revitalization




                   NATIONAL BANK OF ROMANIA           21
     Confidence Effect: Spreads on Eurobonds
 (German Benchmark) Have Decreased Significantly

800                                         1200


700        B ulg aria
                                            1000
           H ung ary
600        P oland
           R omania (rhs )                  800
500
           Turk ey (rhs )

400                                         600


300
                                            400

200

                                            200
100


  0                                         0




      Nov-08
        J ul-07




        J ul-08
       J an-07




       J un-07




       J an-08




       J an-09
      Mar-07




      Mar-09
      May-07




      Oct-07




       Apr-08
      May-08




       Apr-09
      F eb-07




      S ep-07

      Dec-07

      F eb-08




      Aug-08
      S ep-08

      Dec-08
               NATIONAL BANK OF ROMANIA            22
           The Perspectives of Lending (1)

   NBR is prepared to undertake further measures
    which will have a positive effect on bank lending,
    including a gradual ease of the reserve
    requirements if monetary and macroeconomic
    have favorable developments


   The external financing from IFIs will increase the
    availability of funds in the economy, which will
    encourage lending expansion


   However much will depend on how the supply and
    the demand for loans will adjust to the new
    conditions

                NATIONAL BANK OF ROMANIA                 23
              The Perspectives of Lending (2)

Supply of loans
    Bank lending will resume, although the pace of growth will
     be slower than that recorded previously (e.g. 2007)
    A downward adjustment is expected for deposit interest
     rates, which will also push down lending interest rates
    The banks will undergo a restructuring process following
     increasing pressure on profitability and from competitors
Demand for loans
    The decreasing cost of borrowing will stimulate the demand
     for loans
    Any measures supportive of borrowing, such as
     supplementing the capacity of guaranteeing the loans will
     be beneficial
    Confidence will increase as economic prospects improve

                   NATIONAL BANK OF ROMANIA                       24

								
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