BNR official: RO banks with high exposure to public debt face interest rate risk

Romania's central bank warns banks with high exposure on the public debt segment that rising interest rates might give them a hard time.

The country's banking system has two structural weaknesses, and one of them is the high exposure to public debt, he said.

Thus, the exposure of the Romanian banking system to the state (through loans granted to the state in the form of government securities acquisitions) reached 24.8% in 2021, the highest level in the European Union.

In the ranking of banks with high exposures to the state, Romania is followed by Poland, Hungary and Croatia.

In this context, Eugen Rădulescu points out that in the coming years, banks that have financed the state over long maturities (10-15 years) will face a high interest rate risk because the interest rates will resume rising in the future.

The other risk mentioned by Radulescu - highly correlated with the first one - stems from the low capitalization of the local companies that limits their capacity of contracting bank loans.

Rădulescu states that, compared to the level of 2012, of 51%, the share of companies with negative capitals decreased to 32% in 2019.

"However, the capitalization requirement in Romania is RON 154 bln (over EUR 30 bln, 13% of GDP). A very large volume," stated Eugen Rădulescu, quoted by Economica.net.

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