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News from Members Romanian Banking Barometer ARB & EY

Romanian Banking Barometer ARB & EY

by EY April 30, 2014

Website www.ey.com

• Over 80% of banks expect an increase in lending in the next period, according to the „Romanian Banking Barometer ARB & EY";
• A significant percentage of banks anticipate increased in demand for both consumer and business lending;
• Lending policies will partially relax in Manufacturing, Information Technology, Agriculture, Telecom, Healthcare and SMEs segment;
• The legislative framework for insolvency and its enforcement discourages lending, according to more than 85% of the banks surveyed;
• Over 80% of banks expect the costs of credit loss provisions not to increase or even decrease (35%). About 75% of banks expect financial results to improve.

The bank sector looks at the period ahead with more optimism given that a significant percentage of banks anticipate a growing demand for loans from both individuals and businesses, while over 80% of financial institutions expect an increase in lending activity, according to the "Romanian Banking Barometer ARB & EY". EY Romania has conducted, in partnership with the Romanian Banking Association (ARB), the banking industry index called the "Romanian Banking Barometer ARB & EY" through a survey carried out with the management of the ARB member banks. The survey included banks totalising a market share based on assets of more than 85%.

"Financial institutions are interested in supporting the economy through loans. Banks expect a
slight increase in credit demand in several industry sectors and customers segments and at the same time expect partial relaxation of credit policies in sectors such as Manufacturing, Information Technology, Agriculture, Telecommunications, Healthcare and SME segment. ARB makes efforts to remove the barriers in banking activity in order for the banking sector to be more in the position to supporting their clients," says Radu Gratian Gheţea, Chairman of the Board of ARB.

The Banking Barometer ARB & EY will be conducted twice a year with members of the Romanian Banking Association and serves as an informative tool to bankers and the public on how the leaders of the Romanian banking system view the evolution of the economic, legal and business environment and its implications on the banks they run.

"The study is intended as an informative tool to bankers in connection with the perceptions of other players, enabling them to compare their own perspective and expectations with those of the banking system in general. From the following issue, in the second part of the year, the evolution of these expectations will also be visible. In addition, as the study is conducted in other European countries, including Eastern Europe, bankers can draw a parallel with results of the countries in their region," said Gelu Gherghescu, Partner EY Romania.

In the retail area, over 65% of banks expect an increase in demand for consumption loans, and a higher proportion, of 75%, expect an increase in demand for credit cards. Also to a large extent (70%), banks anticipate an increased lending demand from businesses. According to the survey, the insolvency law and the application of this law discourages lending, considered over 85% of surveyed banks.

"The recent changes to the insolvency Code draws improvements to the legal framework, but we believe that there are more things to be done in law enforcement to convince banks that things have changed and therefore may relax lending policies. Maintaining financial discipline is the basic condition for improving the stability of the banking system," said Radu Gratian Gheţea.

Over 80% of banks expect costs of credit loss provisions not to increase or even decrease (35%). Meanwhile, about 75% of banks believe that financial results will improve.

"It is very important for the banking sector to improve its performance and results, thus contributing to their capitalization and an increased appetite for credit," said Gelu Gherghescu. .
In the medium term, a major consolidation in the banking sector is not considered as likely, since 71% of banks expect a medium consolidation and only 14% a large-scale consolidation. The survey reveals that credit institutions are more interested in buying rather than selling credits. Approximately 43% of banks consider buying loan portfolios and 29% selling such assets. Of the latter, many refer to the already common practice of selling relatively small non performing loan portfolios.

Restructuring in the banking sector is close to an end, considering that 70% of banks will not reduce the number of employees in the next period, while 20% expect an increase in the number of employees. Simplifying processes and automating top the agenda of the banking sector along with risk management, while cutting costs is not among the top priorities.


About the ARB
Romanian Banking Association concentrates the entire banking industry in Romania, representing the voice of the banking sector in relation to the Romanian authorities, the International Monetary Fund, European Commission, World Bank and other national and international bodies. The main objective is to represent and defend its members’ interests and rights, especially now when the agreed European establishment of a well-normed banking system may exert additional pressure on banks' role as financier of the economy. Romanian banking sector largely finances the Romanian economy, providing about 92% of total funding from the Romanian financial system. The banking system in Romania, serving millions of customers, proved to be resilient during the crisis, having no need for support from public funds.

About EY Romania
EY is one of the world's leading professional services firms with approximately 175,000 employees in 728 offices across 150 countries, and revenues of approximately $25.8 billion in 2013. Our network is the most integrated at global level and its vast resources allow us to help our clients benefit from every opportunity. In Romania, EY has been a leader on the professional services market since its set up in 1992. Our over 450 employees in Romania and Moldova provide seamless assurance, tax, transactions, and advisory services to clients ranging from multinationals to local companies. Our offices are based in Bucharest, Cluj-Napoca, Timisoara, Iasi and Chisinau. From 1 July 2013, Ernst & Young becomes EY, the logo has been modified in response to this change and the company's new tagline becomes "Building a better working world". The new visual identity reflects the new strategy of EY, Vision 2020. For more information, please visit www.ey.com.

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