AgriBank – statistics

Romania

• Population – 21.7m (2004)
• Total labour force – 9.2m (2004)
• % of labour force in agriculture and forestry - 41% (2004)
• Average lending interest rate – 19.6% (2005)
• % change in consumer prices – 9% (2005)
• GDP at constant 2002 prices – Lei173bn (2004)
• Agriculture and forestry sector as % of total GDP – 13% (2004)

Privatisation and restructuring of the banking sector started late, in 1998, with the sale of the state's holding in the Romanian Development Bank (BRD) to Société Générale (France); the latter increased its holding further in November 2004. The sale of BRD was followed by the disposal of the state's share in Banc Post, and the agricultural bank, Banca Agricola. The second-largest bank, Bancorex, was placed under administration in 1999 and was absorbed by Banca Comerciala Romana (BCR). The privatisation of BCR was a condition of the stand-by agreement with the IMF secured in October 2001, but proved difficult to accomplish. The government finally announced the sale of a 61.88% stake in BCR to Erste Bank of Austria in December 2005 after a competitive tender involving 11 bidders. Erste Bank will acquire the government's holding of 36.88% and a 25% share previously held by the European Bank for Reconstruction and Development (EBRD) and the International Finance Corporation (IFC). The state now holds a majority stake in Eximbank, which is being converted into an export-guarantee institution and is the sole owner of the State Savings Bank (CEC), which is in the process of privatisation. On completion of the BCR sale, the share of state-owned banks in total net banking sector assets will have fallen from 75% in 1998 to 7.5% in 2006.

Banks with a majority of foreign capital account for 23 of the country’s 32 private banks. Banks with majority foreign capital accounted for 59% of total bank assets in 2004 (compared with 76% in Bulgaria), and for 66% of total non-government lending and 55% of total deposits. Foreign-owned banks are now starting to play a significant role in retail banking and the small business sector: they are expanding their number of branches and moving into products such as mortgages, after initially concentrating on the large corporate sector.

The clean-up or closure of problem banks, including the removal of bad and dubious loans, has greatly reduced instability in the banking sector, and vulnerability indicators have improved dramatically in recent years. The share of non-performing loans fell from 35.4% in 1999 to 3.8% in 2000, following the transfer of non-performing loans from Bancorex and Banca Agricola to the Banking Assets Recovery Agency, and had fallen further to 1.7% in 2004.

The EU concluded in its annual progress report in October 2004 that, although the banking system is sufficiently capitalised and prudently supervised, the non-banking financial sector is still underdeveloped, with small equity markets and a relatively undeveloped insurance sector.

Source: The Economist Intelligence Unit