Romanian Banks Most Worried About Credit Risk - PwC

"The Romanian banking sector avoided the initial phase of the financial crisis in late 2008. Credit risk is however now becoming a significant concern for Romanian banks, as the ongoing economic recession leads to a growing number of insolvencies and bankruptcies of local businesses," PwC said in its 2010 Banking Banana Skins survey.

It said the banks expect further deterioration of credit quality as well as increasing provisions for non-performing loans, which could turn into "real losses" for the lenders.

"The outlook of banking in Romania seems difficult to predict. Fears were expressed about the weakness of the economy and its impact on banks through rising loan defaults and declining profitability," the survey noted.

"Another fear is that risk aversion in banks will delay the economic recovery."

According to the survey, part of the 13 Romanian bankers polled by PwC believe the government will provide local lenders with the necessary support, while other respondents fear that such an action would undermine banking responsibility.

Worldwide, banking managers are most concern with the "politicization" of banks as a result of government bailouts and takeovers, PwC said.

"Political interference has never appeared as a risk in 15 years of "Banana Skins" surveys. The top risk is closely linked to the No. 3 risk, "Too much regulation", and the concern that banks will be further damaged by over-reaction to the crisis."

The 2010 Banking Banana Skins polled 450 figures from the financial world in 49 countries, who include practicing bankers as well as close observers of the financial scene and regulators.

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