Romania’s central bank is stressing that, if some banks have difficulties, these would be solved through recapitalization from shareholders rather than by government bailouts, as happened in other countries. “There will be a draft law. BNR has considered this option because all prudence indicators are strengthened in the region. This has nothing to do with what happened to the funds withdrawn by bank shareholders before the agreement with the International Monetary Fund [IMF] and the European Commission was signed in Vienna,” the central bank’s Chief Economist, Valentin Lazea, told Business Standard. In September 2008 and March 2009, foreign lenders, who control 88 percent of the local banking system, withdrew some €2.3 billion from Romania.
They later signed a gentleman’s agreement with the IMF to maintain the financing lines for their local subsidiaries. Earlier this week in Brussels, they renewed this agreement, pledging to send commitment letters to BNR within 30 days. Through the planned legislation, BNR could be granted the authority to demand changes in the management of banks or shareholder structures, if their actions are incorrect, Lazea said. He added that the level of solvency of banks will have to be at least 10 percent by September. However, mother-banks cannot be forced to keep their funds in Romania. The letters of commitment that mother banks are to send to BNR do not include penalties if the banks do not comply, because this would go against EU legislation, according to the central bank’s Deputy Governor Florin Georgescu.
