Romania's large-sized banks boast robust cost/income ratios, but smaller ones are at risk

The cost/income ratio, one of the most important indicators measuring banks' efficiency, dropped to about 50% in the Romanian banking system, within the average European risk range, below the European Union (EU) average of 60%, according to the National Bank of Romania (BNR) quoted by Ziarul Financiar.

The safety interval indicated by the European Banking Authority (EBA) for the cost/income ratio is 50-60%.

Thus, banks in Romania are more efficient than the EU average [the lower the cost/income ratio, the more efficient a bank is]. The problem is that medium and small banks in Romania, which have market shares below 5%, i.e. 25 banks out of a total of 32, have a cost/income ratio between 70% and 80%, being more vulnerable, while large banks (7 banks) boast an average ratio of 48%.

Separately, the net interest income is the main source of operating income of banks in Romania, namely over 70%, well above the European level of 55%, reflecting more competition in the EU and higher sophistication of the business model.

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