Thursday, May 21, 2009

AP: EU banks to boost capital of Romanian subsidiaries

Nine European banks have promised to boost the funding of their subsidiaries in Romania to help them weather the financial crisis, the European Commission and the International Monetary Fund said Wednesday.

The nine banks vowed Tuesday to increase the minimum capital adequacy ratio for subsidiaries from 8 percent to 10 percent, the two organizations said. The ratio is a global recommendation for how much capital banks should put aside to cover risk.

The European Union's executive said the move was precautionary and followed stress tests by Romania's central bank that concluded the foreign-owned banks are well capitalized.

The banks involved are Erste Group Bank, Raiffeisen International, Eurobank EFG, National Bank of Greece ( NBG - news people ), Unicredit Group, Societe Generale, Alpha Bank, Volksbank and Piraeus Bank.

Romania is getting a euro20 billion bailout - a euro12.95 billion loan from the International Monetary Fund, euro5 billion from the EU and another euro1 billion each from the World Bank and the European Bank for Reconstruction and Development.

A rapid economic downturn and a swelling budget gap have hit Romania's public finances hard, two years after it joined the European Union as one of its poorest members.

The downturn raises fears that more people will lose their jobs and be unable to repay loans, which could damage banks already rocked by a financial crisis that has forced them to cover massive losses and curb lending.

The EU forecasts that Romania's economy could contract by 4 percent this year and not grow at all next year.

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