Romania's central bank warns that the default risk is the main threat to financial stability

The default risk has become the main threat to the country’s financial stability, Romania’s National Bank (BNR) governor Mugur Isarescu warned on Thursday, June 14, as the central bank presented its first report on financial stability for 2018. “We have a mix of difficulties in paying back loans and bad faith when it comes to paying back loans,” Isarescu said, adding that “uninspired legislative initiatives” also contributed to this situation, local Ziarul Financiar reported. ‘This is a potential risk but it can become a real risk, so we must not let it expand,” the BNR governor added. According to BNR’s financial stability report, the non-performing loans volume increased by 13% from march 2017 until March 2018, but this increase was masked by the accelerated increase in lending. Thus, the non-performing loans ratio in the local banking system went down to 6.4% at the end of March 2018. However, the report points out that the average monthly instalments on real estate loans went up by RON 108 (some EUR 23) and the average instalments on First House mortgage loans increased by RON 123 (EUR 26) due to higher interest inter-bank rates (ROBOR). The International Monetary Fund (IMF) warned in a recent report that banks in Romania are overly-exposed to the government and real estate sectors and that a financial crisis would bring their solvability ratios down dramatically. The central bank is currently working on a new regulation to limit the indebtedness ratio for individuals. However, the BNR officials denied that a project in this sense recently presented by the media belonged to them. editor@romania-insider.com