The Romanian banks’ exposure to the public sector, including the public debt and the loans extended to state enterprises, exceeded 21% at the end of September last year, which was the third highest ratio among the European Union countries after Hungary (21.8%) and Poland (21.1%), according to data from Romania’s National Bank (BNR) quoted by Ziarul Financiar daily.

The ratio increased in Romania four times compared to before the 2008 recession.

BNR warns that a significant level of public debt held by the banking sector makes it more vulnerable sudden changes (rise) in the sovereign spread.

Separately, the situation may limit the state’s borrowing capacity, a topic particularly important given the wide deficits in 2019 and in the coming years. Romania's public debt hovers around 40% of GDP, relatively low compared to European standards but the banks’ high exposure to government securities limits their ability to lend more money to the government.

editor@romania-insider.com

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