Romania's National Bank (BNR) "sent a strong message to all banks" in the local banking system to identify vulnerable borrowers and make appropriate risk provisions starting with the fourth quarter of this year, to avoid possible massive losses and decapitalization in 2021, announced Florin Georgescu, BNR's first deputy governor, responsible with banking supervision.

Earlier this year, the Government offered local bank debtors a public loan repayment moratorium by the end of the year, while banks designed alternative facilities for customers in trouble. Finance minister Florin Citu said that the Government holds talks with the banks for prolonging the moratorium after December 31, but such an agreement would need the endorsement from the European banking authorities.

BNR has relaxed the prudential framework for banks in 2020 so that loans whose repayment was postponed for more than three months were not considered problematic (non-performing), and the banks did not have to put money aside for them.

One of the crucial objectives for the Romanian banking system is to prevent the significant increase of non-performing loans starting with January 2021, when the current postponement of the payment of installments to natural and legal debtors ceases, according to Georgescu's statements, Ziarul Financiar reported.

As some borrowers affected by the negative economic impact of the coronavirus crisis will face major problems in resuming the payment of loans after the expiration of the moratorium, the non-performing-loan rate will predictably rise in 2021.

After the moratorium expires, debtors are supposed to pay in installments the interest rate accrued during the moratorium period - hence the longer the moratorium, the higher the extra-payment afterward.

iulian@romania-insider.com

(Photo source: Inquam Photos/Octav Ganea)