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Home > Business/Finance > Financial Services > Banking
Romania Commercial Banking Report Q3 2007
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Key Issues
This quarter we have updated a lot of the numeric information in the banking reports. We now have final banking statistics, sourced from the central bank/regulator or trade association, in relation to the end of 2006 for all countries except Iran.
All of the commercial banking reports need to be considered in the context of a global environment that was benign for banks in the vast majority of the 59 countries for which we have collected data. In 2006 the median local currency growth in total assets was 17.2% in Croatia. The median local currency growth in total loans was 18.2% in Bangladesh. The median local currency growth in total deposits was 16.9% in Algeria. In almost all countries local currencies were stable or rising relative to the US dollar. Except in Venezuela and Iran, figures were not distorted by double-digit inflation.
Loan/deposit, loan/asset and loan/GDP ratios all provide a rough measure of the development of the banking systems. Across the 59 countries for which we have collected data, the median loan/deposit ratio is 85.1% in Thailand. The median loan/asset ratio is 54.8% in Romania. The median loan/GDP ratio is 53.4% in Kuwait. Across the eurozone, by comparison, the equivalent numbers are 126.4%, 50.6% and 119.3%. All three ratios are rising in most of the countries for which we have collected data.
By far the most important issue for Romania is that it continues to manage strong economic growth, as seen in 2006 when it outpaced other key regional economies.
Accession to the EU is also key to Romania’s economic environment, as it provides an influx of foreign investment. Since admission to the EU in early 2007, Romania’s structural reform has slowed. This is a challenge to its need to reduce fiscal expenditures, improve the business environment and attract further foreign interest.
Private consumption and investment expenditure, of almost 12%, have been the main drivers of economic expansion. Romania is seeking to shift from a base of agriculture to services and become an enhanced Western European economic model.
A minority government is in power, and with its lack of a parliamentary majority, we expect pressure on the budget deficit targets as the opposition pushes hard for greater spending on pensions in 2008.
Romania’s commercial banking sector is in a period of strong growth, partly due to increased foreign interest and investment. However, it is growing from a small base and remains underdeveloped. Percapita deposits are among the lowest in the region and remain low by world standards.
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