Special committee wants increased banks’ capital requirements in Romania

The National Committee for Macroprudential Surveillance has asked the central bank to increase the capital requirements for banks as of H2 next year by introducing a mandatory buffer of systemic risk. The Committee says that the measure is necessary after identifying two major vulnerabilities to the domestic financial sector, namely the interest rates increase and tensed macroeconomic equilibria, which may push up the NPLs ratio. We remind that the NBR already warned that the major systemic risk to the domestic banking sector is the interest rates growth risk, which could trigger severe negative effects, especially on the retail debtors with RON-denominated mortgage credits.

Therefore, the Committee advises on introducing a supplementary up to 2% buffer to the tier 1 capital requirements for banks. The buffer should be maximum for banks with NPLs ratio of above 5% and provisions below 55%, the supplementary capital requirement is advised on 1% for banks with NPLs ratio of over 5%, but with over 55% provisions and for those with NPLs ratio below 5% but with provision less than 55%. The capital requirements for banks with NPLs below 5% and provisions above 55% should not be affected, the Committee notes. Nevertheless, the Macroprudential Surveillance Committee does not assess as necessary to change the countercyclical capital buffer, which is currently zero, because the total lending in the economy is still below the alert threshold.

The NPLs ratio in the Romanian banking sector was of almost 8.0% at end-September, above the EU average of 4.5%, but on a falling trend. The provisioning coverage ratio was of about 59%, higher than the 45% in the EU. The average tier 1 capital ratio in the domestic banking sector was of nearly 17.2%, higher than the 15.7% EU average.

The National Committee for Macroprudential Surveillance is an independent institution comprising executives from the NBR, FSA and the finance ministry.

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