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Romanian Banks Could Book Lower Provisions For Rescheduled Loans

Romanian lenders might be motivated to refinance or reschedule loans for which they could book lower provisions, if the central bank approves a proposition of the local banking association ARB to change the classification of loans and provisioning regulations.
Romanian Banks Could Book Lower Provisions For Rescheduled Loans
09 dec. 2009, 12:32, English

Currently, banks cannot include a rescheduled or refinanced loan in a better risk category.

Lending regulations might need certain clarifications, so that banks might analyze more carefully the debtor’s financial situation and be able to include the loan in a better risk category, said Nicolae Cinteza, director of the central bank’s supervision department.

On the other hand, Cinteza said banks cannot apply international bookkeeping standards IFRS only for provisions, because a standard cannot be applied only when it is suitable.

„It cannot be made on pieces… I think the IFRS will be applied in 2012. It must be applied for the entire economy,” Cinteza said Wednesday.

According to him, any change in the provisioning regulation might be approved only with the prior consent of the International Monetary Fund.

In the first nine months of the year, the value of Romanian banks’ provisions was at 12.9 billion lei (EUR1=RON4.2249), up around 70% compared with December 2008. In October, banks’ provisions rose to RON13.9 billion.

Early-November, ARB president Radu Ghetea said lenders asked the central bank to change the norms to allow them to change the classification for a rescheduled loan for the remaining period, until its maturity.