Reliability of the banking sector, overcoming customer liquidity problems, consolidating lending on a sustainable basis, accelerating digitalization and significantly increasing savings are the strengths of the banking sector in Romania, according to a note from the European Banking Federation. Thanks to the decrease registered during 2023, the level of non-performing loans reported at the level of the banking system of Romania recorded a historical low since the date of implementation of the methodology of the European Banking Authority (EBA) to determine this indicator (2014), according to the NBR note sent on Tuesday.

The countries that experienced the largest reduction in absolute terms of the number of credit institutions were Germany (-63) and Austria (-22), followed by Finland (-19), Italy (-18) and Poland (-17). The number of banks increased in only 5 countries: Spain (+2), Luxembourg (+1), Greece (+1), Estonia (+1) and Slovenia (+1), the quoted note also shows.

Romania’s banking sector continued the trend of improving its financial condition, despite the challenges caused by the difficult macroeconomic and geopolitical context of 2023, according to the BNR note sent on Tuesday.

Solvency indicators remained higher than the current prudential requirements, their value was higher than the European average, namely 22.3%, compared to the EU average in September 2023, which was 19.9%.

Liquidity has improved compared to 2022, also positioning itself above values ​​typical for the EU banking sector. The increase in the liquidity coverage ratio (LCR – Liquidity Coverage Ratio) was significant (281% at the end of 2023 compared to 209% in 2022), the level of the indicator significantly exceeded the regulated limits (100%) and the European average (160.7% in September 2023) year, latest available date).

The ratio between loans and deposits is maintained at an optimal level – 67.8% in December 2023. The indicators, which evaluate the quality of the provided loans, also experienced positive dynamics, despite the significant impact on the solvency of debtors.

The level of non-performing loans (2.3%, December 2023) and the degree of coverage by reserves (65.5%, December 2023) place the Romanian banking sector in the category of low risk at the EU level.

Thanks to the reduction recorded during 2023, the level of non-performing loans reported at the level of the Romanian banking system recorded a historical low since the date of implementation of the European Banking Authority (EBA) methodology for determining this indicator (2014).

All these indicators, recorded at the level of the banking system, contributed to the improvement of the country’s rating and, implicitly, to the ease of access and the reduction of the cost of external loans of the Romanian state, representatives of the Central Bank also say.

The profitability of the banking sector continued to strengthen, indicators of the efficiency of the use of capital and assets at the end of 2023 amounted to 20.4% (ROE) and 1.8% (ROA), which is higher than the level of the previous year (16.4%, respectively 1.5%, December 2022).

Banks’ investments in digitization also contributed to the increase in profits. In addition to strengthening the banking system, the digitalization process has allowed to expand customers’ access to banking products and services through digital channels.

In the category of structural changes, it should also be noted that banks with majority national ownership continued to strengthen their position in the banking sector, reaching more than 34% of total banking assets at the system level by the end of 2023. The process of acquisitions and mergers, which has been recorded in the banking market in recent years, also contributed to strengthening this position.

All these positive changes in the banking system in an uncertain macroeconomic and geopolitical context, characterized by the persistence of certain imbalances, demonstrated the resilience of the Romanian banking system, which was also mentioned in the press statement of the IMF representatives published at the end of the IMF mission in January this year, according to which the banking system maintains strong capital positions, liquidity and profitability.