Central bank official: Banking sector should avoid constantly relying on the state

Banking policies in Romania are somewhat more cautious than those in the European Union, and in the future it is very important for the banking sector to avoid falling into a "lazy banking" paradigm, that is constantly relying on the state, Deputy Director of the Financial Stability Department at the National Bank of Romania (BNR) Matei Kubinschi told a banking-focused event on last Monday."It's very clear that banking policies in Romania are somewhat more prudent than those in the European Union, and banks have a proactive approach in recognising potential losses that may arise through this channel (...) We see that the relationship between the state and banks has significantly strengthened in recent years. If in 2007 we started from a level below 5%, today over 30% of banks' balance sheets, total assets, are linked to the state (...) The risks taken on by banks have decreased significantly. If in 2008 the general risk rate was over 50%, today it's below 30%, so we are seeing a massive reduction in the risk banks carry in their portfolios. I believe that in the future it's very important for the banking sector to avoid entering a 'lazy banking' paradigm - relying on the state to take over risks, investing only in government securities or state-guaranteed programmes, and not lending to the real economy. It's crucial for banks to find the right balance between excessive risk-taking and lending to the real economy, because we have a significant issue with financial intermediation. It's the lowest in Europe, and there's no sign of improvement, on the contrary, it has even declined recently," the BNR representative said.He also pointed out that the profitability of Romania's banking system remains at a very good level, with a slight increase in the cost-to-income ratio."The capitalisation level (of banks) is partly due to the National Bank's prudent policies and its recommendations during these uncertain times to retain part of the profits to build reserves in case of a shock. Of course, we've gone through this whole process of cleaning up balance sheets, which reached a low point, and now we're seeing a slight, natural increase. But if we look at Tier 1 capital, we can see - for last year, December 2024 - a decline. In general, all banks complied with our recommendation to retain 50% of last year's profit. So there are no issues here. Looking at the other indicators, profitability remains at a very good level. We've seen a slight increase in the cost-to-income ratio. In 2023 we had reached a very good level, in the green zone, even, at 47%, and we were in a much better position than the banking sector in the European Union. If we look at the figure for the first quarter and analyze it, the impact will be relatively similar," Kubinschi said.The Ziarul Financiar publication organised the "ZF Bankers Summit 2025" event from June 2 to 4.