Barisitz, Stephan --- "The Romanian banking sector: progress, problems and prospects" [2004] ELECD 164; in Liebscher, Klaus; Christl, Josef; Mooslechner, Peter; Ritzberger-Grünwald, Doris (eds), "The Economic Potential of a Larger Europe" (Edward Elgar Publishing, 2004)

Book Title: The Economic Potential of a Larger Europe

Editor(s): Liebscher, Klaus; Christl, Josef; Mooslechner, Peter; Ritzberger-Grünwald, Doris

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781843769620

Section: Chapter 19

Section Title: The Romanian banking sector: progress, problems and prospects

Author(s): Barisitz, Stephan

Number of pages: 14

Extract:

19. The Romanian banking sector:
progress, problems and prospects
Stephan Barisitz

Compared to other financial markets, the Romanian banking sector is small
and not very developed. According to recent estimates, only about one-
third of the population is reported to possess a bank account and less than
one-fifth of Romanian enterprises take out bank loans. In terms of loan
volume to GDP, Romania accounts for less than half of the average level of
central European transition countries, which themselves are still substan-
tially behind the EU-15. However, banking activities have been in the catch-
ing-up lane since the crisis the country experienced in 1997­99. Today a
major share of the assets of the banking sector is in foreign ownership. As
a consequence of the swift credit expansion in 2002 and 2003 and of con-
tinuing structural problems the risk potential has risen recently, though.1


1. BANKING CRISIS AND REFORM MEASURES
Until 1998 the Romanian commercial banking system was overwhelmingly
state-owned. Credit institutions were granting loans to a largely un-
restructured real sector dominated by large, inefficient, state-owned factor-
ies, subject to quasi automatic refinancing by the Romanian National
Bank, which conducted an accommodative monetary policy. Inflation rates
were very high. For example (year-end) CPI inflation amounted to 62 per
cent in 1994 and 57 per cent in 1996. After the election of a more strongly
reform-minded government at end-1996, serious macroeconomic stabiliza-
tion policies and structural reforms were initiated. The ...