Thursday, May 21, 2009

Romania Says Banks to Boost Capital on Late Payment

By Adam Brown and Irina Savu

May 20 (Bloomberg) -- Romanian banks, about 90 percent foreign-owned, have agreed to boost their capital as overdue debt rises because of the economic contraction and slowing wage growth, central bank Vice Governor Florin Georgescu said.

“In 30 days, the banks and the central bank of Romania will sign the necessary agreements,” Georgescu, of the Banca Nationala a Romaniei, said at a seminar in Bucharest.

Romania’s banking sector is dominated by Banca Comerciala Romana SA, owned by Austria’s Erste Bank AG, and BRD-Groupe Societe Generale. Georgescu and the IMF also met in Vienna yesterday with Raiffeisen Centrobank AG, the National Bank of Greece SA and five other owners of Romania’s biggest banks.

The IMF said in a news release today that representatives from the finance ministries of Austria, Greece, France and Italy attended the Vienna meeting, along with representatives from the European Central Bank.

Overdue debt is soaring as the leu has weakened 12 percent against the euro in the past year, making foreign debt harder to repay, after a lending boom in the European common currency.

“The Romanian central bank has asked us to recapitalize,” Dominic Bruynseels, Banca Comerciala Romana’s chief executive officer, said in a speech at the same seminar in Bucharest today.

Loan payments in Romania more than 30 days overdue rose to a record 4.3 billion lei ($1.4 billion) in February from 1.3 billion lei a year earlier as the highest interest rate in the European Union, at 9.5 percent, increased domestic debt loads.

Romania last month agreed on a 20 billion-euro ($27 billion) international financing package led by the IMF. The IMF and Romania’s government negotiated with banks in Romania to maintain or increase capital and Romania has agreed to cut government spending as part of the accord.

Overall growth in private debt slowed to an annual 30.7 percent in February from 34 percent in January, according to central bank data. Overdue debt, as measured by payments more than 30 days late, counted for about 2 percent of the total private debt load of 207 billion lei in February.

To contact the reporter on this story: Adam Brown in Bucharest atabrown23@bloomberg.net

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