Latvia and Romania record the highest rates in non-performing credits in the region, Moody's Investors Service manager for Central and East Europe Petr Vins declared on Tuesday, June 15, during the first Crediting Risk Management Conference in Romania, organised by ICAP Romania and CYCLE European. In the Moody's rep opinion, Romania is similar to Ukraine and Russia from the law enforcement transparency point of view. The other speakers, Fitch and ICAP reps, analysed the Romanian economy from the perspectives of various sectors. The joint opinion was that the highest risks came from the banking sector, made vulnerable by the increase of non-performing credits, bankruptcies and insolvencies.

  • In 2008, the structured products took place. Banks followed in 2009. 2010 adds the States' debts. What expects us in 2011, we don't know yet, Fitch says.

Fitch Corporate segment manager Richard Hunter presented a brief description of the most important economic issues in the last years. In 2008, the structured products crisis occurred. In 2009, banks were on the dust pan. In 2010, public debts kicked in. Nobody knows what is going to happen in 2011, Hunter appreciated.

He explained that one of the hopes regards the American economy recovery, which he trusts and says could help the global recovery, alongside the growth of the BRIC states.

Romania's risk is considered "moderate" by the main rating agencies' reps, who met on Tuesday in Bucharest. Talking about the conditions of the global economic recovery, Moody's representatives declared they were not expecting a string comeback in 2010 or 2011. the main "breaks" are the banking sector and the public deficits crisis.

Romanian banks are included in the medium risk Group D (on a scale from A to E, where E represents the maximum risk), but not one bank from the emerging economies holds the superior A rating, according to Leonidas Kotsaftis, ICAP Group Credit Risk Assessment Services manager.

  • The Credit crisis infected business in Romania and quick reaction is needed

The perception on the Romanian economy has deteriorated dramatically and the stress tests applied to the banking system indicates that the highest risk regards the increase in non-performing credits, Kotsaftis confirmed. In 2009, the debt went up a lot, with the number of overdue payments growing rapidly. The credit crisis infected businesses and a quick action is needed. In 2009, bankruptcy was on ascending trend, Kotsaftis added.

Moody's also warned that the Romanian banking system’s performances are going to continue to be affected by the difficult macroeconomic perspectives. According to a Moody's report, the Romanian banking system proved so far to be resistant to the economic shocks, although ratings have gone down, as a consequence of lower incomes and the increase in crediting costs.

According to the document, 2010 will be a difficult year for the Romanian banks, because of high level commissions to third parties for the non-performing credits and a lower profit rate, although fears regarding liquidity and capital needs have tempered to some extent.

Nevertheless, systemic risks are reduced by the engagement taken by the international banking groups with branches in Romania towards the International Monetary Fund (IMF), namely to support their branches and maintain exposure in the Romanian market.

  • Fitch: Romanian banks are in group D and I have the feeling they will remain there for a while

During the last years, Governments across the globe have been trying to save the banks. Some went down anyway. A solid bank is a bank that can do without governmental support. Romanian banks are in group D and I have the feeling they will stay there for a while, Fitch Ratings rep Richard Hunter added. He concluded that Fitch doesn't intend to modify Romania's rating. For the moment.