Romania: Financial sector

Liviu Voinea Deputy Governor

Bucharest, 15 March 2017

2

The role of National Bank of Romania

• The role of Central Banks: secure price stability; additionally, secure

financial stability and exchange rate stability

• NBR has reached all three stabilities

Price stability

• Interest rates

historically low

• Low inflation, not

deflation

Financial stability

• Reduced risk of

legislative uncertainty

• Banking sector has

been consolidated

• NPL ratio

• No use of public

money to save banks

Exchange rate

stability

• Higher net

international

reserves

• Low volatility of the

exchange rate

I.1. Low inflation, not deflation

Inflation rate

Source: NBR

3

-4

-2

0

2

4

6

8

10

12

Mar

-05

Sep

-05

Mar

-06

Sep

-06

Mar

-07

Sep

-07

Mar

-08

Sep

-08

Mar

-09

Sep

-09

Mar

-10

Sep

-10

Mar

-11

Sep

-11

Mar

-12

Sep

-12

Mar

-13

Sep

-13

Mar

-14

Sep

-14

Mar

-15

Sep

-15

Mar

-16

Sep

-16

Inflation rateInflation rate excluding the first-round effects of VAT rate changesInflation targetLower bound of inflation target bandUpper bound of inflation target band

percent

I. Price stability

Negative inflation was driven by fiscal

measures, while inflation excluding VAT cuts remained close to

our target band

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

ian

.-1

4

mai

.-1

4

sep

.-1

4

ian

.-1

5

mai

.-1

5

sep

.-1

5

ian

.-1

6

mai

.-1

6

sep

.-1

6

CZ HU PL

percent

4

Inflation has re-entered into the positive territory

-4

-2

0

2

4

6

8

10

12

-4

-2

0

2

4

6

8

10

12

2014Q4

2015Q4

2016Q4

2017Q4

2018Q4

uncertainty interval

annual CPI inflation rate (previous round)

annual CPI inflation rate (net of the VATfirst-round effect)

annual CPI inflation rate

annual percentage change

Inflation target: 2.5 1pp

annual percentage change

Note: According to the February 2017 Inflation Report. The uncertainty interval was calculated based on the forecast errors in the NBR

projections during 2005-2016. The magnitude of forecast errors is positively correlated with the time horizon they refer to.

Source: National Institute of Statistics, National Bank of Romania projections and calculations

Inflation Forecast

I.2. Favourable monetary conditions:

Monetary policy rate at historical lows

Central bank’s interest rates

Source: NBR

5

Minimum reserve requirements

0

2

4

6

8

10

12

14

16

Jan-0

9

Jul-

09

Jan-1

0

Jul-

10

Jan-1

1

Jul-

11

Jan-1

2

Jul-

12

Jan-1

3

Jul-

13

Jan-1

4

Jul-

14

Jan-1

5

Jul-

15

Jan-1

6

Jul-

16

Jan-1

7

Lombard rate Deposit facility rate Key policy rate

percent

0

5

10

15

20

25

30

35

40

45

Jan-0

9

Jul-

09

Jan-1

0

Jul-

10

Jan

-11

Jul-

11

Jan-1

2

Jul-

12

Jan-1

3

Jul-

13

Jan-1

4

Jul-

14

Jan-1

5

Jul-

15

Jan-1

6

Jul-

16

Jan-1

7

Local currency Foreign currency

percent

6

Interbank rates declined in line with the policy rate

Policy Rate and Bank Interest Rates to Non-Bank Clients

0

10

20

30

40

50

Jan

.04

Jul.0

4Ja

n.0

5Ju

l.05

Jan

.06

Jul.0

6Ja

n.0

7Ju

l.07

Jan

.08

Jul.0

8Ja

n.0

9Ju

l.09

Jan

.10

Jul.1

0Ja

n.1

1Ju

l.11

Jan

.12

Jul.1

2Ja

n.1

3Ju

l.13

Jan

.14

Jul.1

4Ja

n.1

5Ju

l.15

Jan

.16

Jul.1

6Ja

n.1

7

policy rate (end of period)

3M ROBOR (monthly average)

new loans to non-financial corporations

new loans to households

% p.a.

0

5

10

15

20

25

Jan.

04Ju

l.04

Jan.

05Ju

l.05

Jan.

06Ju

l.06

Jan.

07Ju

l.07

Jan.

08Ju

l.08

Jan.

09Ju

l.09

Jan.

10Ju

l.10

Jan.

11Ju

l.11

Jan.

12Ju

l.12

Jan.

13Ju

l.13

Jan.

14Ju

l.14

Jan.

15Ju

l.15

Jan.

16Ju

l.16

Jan.

17

policy rate (end of period)

new deposits of non-financial corporations

new deposits of households

% p.a.

Source: National Bank of Romania

Lower policy rate led to

lower interest rates for loans to households and companies

Interest rates for local currency loans to

households and non-financial companies

Source: NBR

7

0

5

10

15

20

25

Jan. 2007

Aug. 2007

Mar

. 2008

Oct

. 2008

May

. 2009

Dec

. 2009

Jul.

2010

Feb

. 2011

Sep

. 2011

Apr.

2012

Nov. 2012

Jun. 2013

Jan. 2014

Aug. 2014

Mar

. 2015

Oct

. 2015

May

. 2016

Dec

. 2016

Credit to households

Credit to non-financial companies

percent

0

1

2

3

4

5

6

7

8

Jan. 2007

Aug. 2007

Mar

. 2008

Oct

. 2008

May

. 2009

Dec

. 2009

Jul.

2010

Feb

. 2011

Sep

. 2011

Apr.

2012

Nov. 2012

Jun. 2013

Jan. 2014

Aug. 2014

Mar

. 2015

Oct

. 2015

May

. 2016

Dec

. 2016

Interest rate margin - households

Interest rate margin - non-financial companies

percent

Source: NBR

Interest rate margins (local currency)

8

II. Financial stability II.1. Reducing the risk of legislative uncertainty

• Datio in solutum (giving in payment) law

NBR warned repeatedly, through all Executive Board members, against the negative impact

of this law on financial stability.

BNR intervened in this debate because it answered to the requests from the President and

Parliament.

Financial Stability Report 1/2016 considered legislative uncertainty as a severe systemic

risk.

Three amendments proposed by NBR were adopted, limiting the amount and destination of

loans, and excluding First House loans.

Other amendments proposed by NBR referring to loan to value and debt service to income

limits were rejected.

NBR’s position was aimed at preserving financial stability, while making sure that the law

helped only those debtors who could not afford to pay anymore, not those who didn’t want to

pay anymore.

II.1. Reducing the risk of legislative uncertainty

• Datio in solutum law (cont.)

The Constitutional Court decided that the law must respect the Civil Code, so the debtor

must prove that: he/she entered into default because of unpredictable circumstances (the

debtor can’t pay); and that he/she tried to settle with the bank; and a court of law must

decide that.

Therefore, the law is no longer a loss event for banks at the moment of adoption, but only

on a case by case situation, when a court decides so. Losses are phased-out over many

years.

However, problems remain: debt does not go away, and the need for a solution remains.

There is no standard for what unpredictable means (what is the trigger?)

Common understanding and common practice is still needed.

9

Number of notifications for giving in payment has consistently declined

Notifications for giving in payment

Source: NBR

10

Source: NBR

680

1666

1165

681

506 490

248 178 186

498

0

200

400

600

800

1000

1200

1400

1600

1800

0

1000

2000

3000

4000

5000

6000

7000

8000

30.0

5.2

016*

29.0

6.2

016

27.0

7.2

016

29.0

8.2

016

26.0

9.2

016

31.1

0.2

016

28.1

1.2

016

26.1

2.2

016

30.0

1.2

017

27.0

2.2

017

Monthly new requests (right scale)

Total requests

• 6966 notifications (of which

99% from physical persons)

• 6023 debtors (of which 755

notified more than one loan)

• loans amounting to 2 billion lei

• 67% are on balance sheet

• 93% are for foreign exchange

loans (40% in CHF)

• 62% are NPLs

• 76% were granted in 2007-

2008

• More than 90% have LTV>1

Majority of giving in payment notifications are for FX loans and for loans with LTV above 1

Structure of the giving-in-payment

requests by denominating currency

Source: NBR

11

Source: NBR

Distribution of giving in payment loans by

LTV

RON

516

EUR 3,547

CHF 2,832

Other

currencies

71

0

100

200

300

400

500

600

700

800

900

0

500

1,000

1,500

2,000

2,500

3,000

Exposures

Number of requests for giving in payment(right axis)

lei mil.

II.1. Reducing the risk of legislative uncertainty (cont.)

• CHF conversion law

The CHF conversion law was adopted by the Parliament, but the Constitutional

Court decided that the law is not constitutional.

The NBR advocated for a bilateral negotiation between banks and debtors with CHF

loans. One size fits all is not the best option, each particular case requires individual

solution.

As of December 2016:

• 38519 CHF debtors (vs. 75412 at end-2014)

• Volume: 5.4 billion lei (vs. 10 bn. At end-2014)

• 40% not backed by mortgages

Since January 2015, banks received 59411 requests from debtors regarding CHF

loans, of which they admitted 37366 (62.9%): 24853 conversions and 12513

restructurings.

12

Stock of CHF loans significantly declined, as well as the number of debtors with CHF loans

Stock of CHF loans Number of persons with CHF loans

Source: NBR Source: NBR

13

0

2,000

4,000

6,000

8,000

10,000

12,000

Dec

.20

14

Jun.2

015

Dec

.2015

Jun.2

016

Dec

.2016

Jan.2

017

Households

Non-financial companies

lei bln.

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

Dec

.2014

Jun.2

015

Dec

.2015

Jun.2

016

Dec

.2016

14

II.2. Banking sector

0

2

4

6

8

10

12

14

16

18

20

Dec

.08

Mar

.09

Jun.

09Se

p.09

Dec

.09

Mar

.10

Jun.

10Se

p.10

Dec

.10

Mar

.11

Jun.

11Se

p.11

Dec

.11

Mar

.12

Jun.

12Se

p.12

Dec

.12

Mar

.13

Jun.

13Se

p.13

Dec

.13

Mar

.14

Jun.

14Se

p.14

Dec

.14

Mar

.15

Jun.

15Se

p.15

Dec

.15

Mar

.16

Jun.

16Se

p.16

Dec

.16*

solvency ratio

Tier 1 capital ratio for credit risk

Tier 1 capital ratio

total capital ratio (CRD IV/CRR)

Tier 1 capital ratio (CRD IV/CRR)

percent

Source: National Bank of Romania

39.3

2.0

0

1

2

3

4

5

0

9

18

27

36

45

Dec

.08

Jun.

09

Dec

.09

Jun.

10

Dec

.10

Jun.

11

Dec

.11

Jun.

12

Dec

.12

Jun.

13

Dec

.13

Jun.

14

Dec

.14

Jun.

15

Dec

.15

Jun.

16

Dec

.16*

Jan.

17*

immediate liquidity

liquidity ratio (rhs)

percent

Liquidity Indicators

Immediate liquidity = (cash, demand deposits and time deposits withbanks+ unpledged government securities)/Total l iabilities (prudent level > 30%)

Liquidity ratio = effective l iquidity/required liquidity(regulated threshold = 1)

Capital Adequacy Indicators

Analysis Ratios for the Banking System

*) Indicators are calculated based on data in prudential reports, prior to submission of audited annual accounts.

15

137.3

80.6

93.8

67.9

232.7

107.6

0

50

100

150

200

250D

ec.

05

Mar

.06

Jun

.06

Sep

.06

De

c.0

6M

ar.0

7Ju

n.0

7Se

p.0

7D

ec.

07

Mar

.08

Jun

.08

Sep

.08

De

c.0

8M

ar.0

9Ju

n.0

9Se

p.0

9D

ec.

09

Mar

.10

Jun

.10

Sep

.10

De

c.1

0M

ar.1

1Ju

n.1

1Se

p.1

1D

ec.

11

Mar

.12

Jun

.12

Sep

.12

De

c.1

2M

ar.1

3Ju

n.1

3Se

p.1

3D

ec.

13

Mar

.14

Jun

.14

Sep

.14

De

c.1

4M

ar.1

5Ju

n.1

5Se

p.1

5D

ec.

15

Mar

.16

Jun

.16

Sep

.16

De

c.1

6

total lei foreign currency

Loan-to-Deposit Ratio*

percent

* based on data in the monetay balance sheet

Source: National Bank of Romania

16

2,2062,533

4,401

816

-516-777

-2,342

489 1,1531,468

49

597

210

-1,588

-4,667

818

1,193

2,247

4,475

1,170

2,410

3,6964,259

284

-5,000

-4,000

-3,000

-2,000

-1,000

0

1,000

2,000

3,000

4,000

5,000

-25

-20

-15

-10

-5

0

5

10

15

20

25D

ec.

06

De

c.0

7

De

c.0

8

De

c.0

9

De

c.1

0

De

c.1

1

De

c.1

2

Mar

.13

Jun

.13

Sep

.13

De

c.1

3

Mar

.14

Jun

.14

Sep

.14

De

c.1

4

Mar

.15

Jun

.15

Sep

.15

De

c.1

5

Mar

.16

Jun

.16

Sep

.16

De

c.1

6*

Jan

.17*

net profit (rhs)

ROA

ROE

Banking System Profitability

percent lei million

Note: Starting January 1, 2012, Romanian credit institutions apply the IFRS for accounting purposes.

Source: National Bank of Romania

*) Indicators are calculated based on data in prudential reports, prior to submission of audited annual accounts.

-20

-10

0

10

20

30

40

50

60

70

80

90

100

Jan.

06M

ay.0

6Se

p.0

6Ja

n.07

May

.07

Sep

.07

Jan.

08M

ay.0

8Se

p.0

8Ja

n.09

May

.09

Sep

.09

Jan.

10M

ay.1

0Se

p.1

0Ja

n.11

May

.11

Sep

.11

Jan.

12M

ay.1

2Se

p.1

2Ja

n.13

May

.13

Sep

.13

Jan.

14M

ay.1

4Se

p.1

4Ja

n.15

May

.15

Sep

.15

Jan.

16M

ay.1

6Se

p.1

6Ja

n.17

total

lei-denominated loans

foreign currency-denominated loans

-20

-10

0

10

20

30

40

50

60

70

80

90

100

Jan.

06M

ay.0

6Se

p.0

6Ja

n.07

May

.07

Sep

.07

Jan.

08M

ay.0

8Se

p.0

8Ja

n.09

May

.09

Sep

.09

Jan.

10M

ay.1

0Se

p.1

0Ja

n.11

May

.11

Sep

.11

Jan.

12M

ay.1

2Se

p.1

2Ja

n.13

May

.13

Sep

.13

Jan.

14M

ay.1

4Se

p.1

4Ja

n.15

May

.15

Sep

.15

Jan.

16M

ay.1

6Se

p.1

6Ja

n.17

households

total

non-financial corporations & financialcorporations other than MFIs

Loans to the Private Sector– stock –

real annual percentage change* real annual percentage change*

*) based on CPI

Source: National Institute of Statistics, National Bank of Romania

17

Structure of banks’ credit portfolios

by currency (end of year) Banks’ funding

Source: NBR

18

Source: NBR

0

50

100

150

200

250

300

350

Jan

-07

Au

g-0

7

Mar

-08

Oct

-08

May

-09

De

c-0

9

Jul-

10

Feb

-11

Sep

-11

Ap

r-1

2

No

v-1

2

Jun

-13

Jan

-14

Au

g-1

4

Mar

-15

Oct

-15

May

-16

De

c-1

6

Foreign liabilities Domestic deposits

lei bln.

39.7 36.7 36.3 37.3 38.8 43.5 50.3

57.1

60.3 63.3 63.7 62.7 61.2 56.5 49.7

42.9

0

10

20

30

40

50

60

70

80

90

100

2009 2010 2011 2012 2013 2014 2015 2016

Share of foreign currency loans Share of local currency loans

percent

Reduced contagion risk

19

II.3. NPLs continued to declined 20

.4

20.5

19.2

15.3

13.9

13.9

12.8

12.3

11.7

21.5

20.7

20.2

16.2

15.7

15.1

13.5

13.5

11.3

10.0

9.5

9.8

0

2

4

6

8

10

12

14

16

18

20

22

Mar.14 Apr.14 Jun.14 Sep.14 Dec.14 Mar.15 Jun.15 Sep.15 Nov.15 Dec.15 Mar.16 Jun.16 Sep.16 Dec.16* Jan.17*

Developments in Non-Performing Loans

% in total loan portfolio

Indicator calculated based on prudential reports submitted by all banks (both banks that determine the minimum capital requir ement for credit risk based on the standardised approach and banks using internal models -based approach) for loans meeting the non-performance criteria(debt service longer than 90 days and/or where judicial proceedings have been initiated).

EBA – defined indicator, determined as the ratio between a) the total non-performing exposures represented by loans and advances(where non-performing exposure is defined as any exposure satisfying any of the following criteria: (i) material exposures which are morethan 90 days past due; (ii) the debtor is assessed as unlikely to pay its credit obligations in full without realisation of c ollateral, regardless of the existence of any past due amount or of the number of days past due) and b) total exposures represented by loans and advances.

Source: National Bank of Romania

In June 2015, the methodological notes on the FINREP framework at solo level were amended so as to include cash balances with the central bank and other demand deposits with credit institutions in the non-performing exposure report form.

*) Indicators are calculated based on data in prudential reports, prior to submission of audited annual accounts.

Coverage ratio amongst the highest in EU

NPL coverage ratio in the EU (2016 Q3)

20

0

10

20

30

40

50

60

70

SI

RO

HU

CZ

PL

HR

AT

BG

SK

FR

GR IT ES

BE

LU PT

MT

DE IE CY

NL

LT

DK

NO

LV

GB

EE

SE FI

percent

EU average

Note: Coverage ratio equals provisions divided by total non-performing loans

Source: EBA Risk Dashboard – 2016 Q3

NPL coverage ratio is among the highest in the EU

Texas ratio (September 2016)

Note: Texas ratio is the ratio of non-performing loans as defined by EBA to the sum of

the Tier 1 capital and loan loss provisions

Source: ECB, consolidated data

0

20

40

60

80

100

120

140

160

CY GR IT PT BG IE SI RO HR ES DK LV AT FR MT BE NL DE FI SE EE LU

UE

procente

21

22

2007 2008 2009 2010 2011 2012 2013 2014 2015

BE - -30.0 -0.7 280.9 -193.3 -2,116.3 600.8 -93.6 -97.9

BG - - - - - - - -739.2 -95.3

CZ - - - - - - - - -

DK - 0.6 162.1 562.1 -180.4 511.3 326.1 163.3 11.3

DE - -3,071.5 -2,980.3 -33,004.4 173.6 -1,168.2 1,435.6 577.6 -491.5

EE - - - - - - - - -

IE - - -3,767.0 -35,543.7 -6,370.5 354.9 438.7 14.6 -1,765.6

EL - - 373.0 960.0 633.0 -5,347.0 -19,446.0 136.0 -7,171.0

ES - -12.0 696.0 771.6 -3,515.0 -38,289.0 -3,277.0 -1,350.0 -535.0

FR - 48.0 1,356.0 995.0 601.0 -2,198.0 238.0 27.5 -18.2

HR - - - -61.7 -3.0 -29.5 -3.9 -4.0 -69.8

IT - - -16.5 88.0 177.4 -86.3 -150.0 361.9 -3,534.8

CY - - 10.0 27.0 25.0 -40.5 -31.0 -1,486.0 -161.0

LV - 2.1 -183.9 -401.7 -70.3 -101.5 33.1 -79.5 -8.4

LT - - - -32.3 -888.7 -41.3 -174.9 475.5 212.0

LU - -20.4 -68.7 50.7 54.7 27.7 -3.0 46.3 71.6

HU - - 4.3 7.4 9.8 0.8 - - -

MT - - - - - - - - -

NL - -161.0 -2,304.0 -1,082.0 -112.0 -221.0 -1,188.0 -50.0 412.0

AT - 2.2 -2,656.6 -327.0 -292.4 -1,318.9 -1,489.8 -5,338.9 -2,201.5

PL - - - - - - - - -

PT - 2.4 12.2 -2,219.3 -866.3 -932.0 -585.2 -5,126.5 -2,822.6

RO - - - - - - - - -

SI - - 3.7 13.5 -236.9 -62.1 -3,671.1 -693.4 -529.9

SK - - - - - - - - -

FI - - - - - - - - -

SE - -1.5 128.7 262.1 228.4 134.1 111.8 6.9 1.7

UK 61.4 -5,587.2 -8,076.9 1,522.4 1,077.3 2,009.0 -1,225.8 -769.1 -564.9

II.4. Romania, one of the five EU countries which haven’t used public funds to support financial system during the crisis

Source: Eurostat

Costs/revenues for governments to support financial institutions (mil. Euro)

23

2007 2008 2009 2010 2011 2012 2013 2014 2015

BE - 21,546.0 19,503.2 17,921.7 17,549.9 18,502.5 15,044.0 14,535.7 13,224.2

BG - - - - - - - 1,201.6 1,086.5

CZ - - - - - - - - -

DK - 586.6 10,072.1 9,452.5 7,734.3 6,381.2 5,867.6 1,099.6 2,953.5

DE - 47,434.4 85,303.5 267,412.9 234,697.0 250,216.8 210,925.3 197,927.4 185,538.0

EE - - - - - - - - -

IE - - 7,000.0 6,634.1 36,419.0 31,621.0 22,288.9 11,744.0 8,245.4

EL - - 3,983.0 3,911.0 4,959.0 30,875.0 29,535.0 16,778.0 10,457.0

ES - 9,337.0 19,335.0 25,918.0 19,200.0 9,824.0 6,981.0 6,095.0 6,095.0

FR - 10,823.0 6,751.0 2,463.0 30.0 30.0 30.0 30.0 30.0

HR - - - 69.2 63.7 40.6 40.2 22.4 74.7

IT - - 4,050.0 4,050.0 2,600.0 2,600.0 4,071.0 1,071.0 -

CY - - - - - 1,796.1 - - -

LV - 951.4 929.6 1,473.8 731.1 690.0 524.9 367.9 179.1

LT - - - - 1.7 1.4 6.5 8.7 8.7

LU - 2,506.2 2,534.7 2,534.7 2,534.7 2,607.7 2,607.7 2,607.7 2,607.7

HU - - 1,758.0 995.3 498.9 - - - -

MT - - - - - - - - -

NL - 81,431.0 56,013.0 49,926.0 43,263.0 40,212.0 44,485.0 38,001.0 27,522.0

AT - 900.0 40,438.1 21,217.4 17,966.2 15,302.0 11,322.2 26,000.5 31,922.1

PL - - - - - - - - -

PT 150.0 930.0 1,930.0 6,374.6 6,374.6 12,709.1 12,679.1 9,200.8 9,811.6

RO - - - - - - - - -

SI - - 1,430.0 1,430.0 1,472.0 1,524.0 3,493.0 5,098.9 3,576.7

SK - - - - - - - - -

FI - - - - - - - - -

SE - 221.9 2,016.5 2,313.8 1,694.5 2,052.0 - - -

UK - 62,489.2 105,793.3 207,359.9 158,233.0 173,117.3 157,677.8 158,549.2 111,043.0

Source: Eurostat

General government assets (mil. Euro)

24

2007 2008 2009 2010 2011 2012 2013 2014 2015

BE - 21,576.0 21,405.3 21,046.3 24,786.7 22,863.8 16,337.7 16,486.5 13,831.6

BG - - - - - - - 1,201.6 1,086.5

CZ - - - - - - - - -

DK - 586.6 10,072.1 9,452.5 7,734.3 6,381.2 5,867.6 1,099.6 340.2

DE - 52,367.7 94,697.0 306,567.7 292,534.6 295,195.7 248,709.3 238,784.3 224,679.8

EE - - - - - - - - -

IE - - 10,767.0 46,374.9 82,580.6 80,408.7 70,645.9 59,220.4 58,321.4

EL - -6.0 3,947.0 3,407.0 5,081.0 35,710.0 42,080.0 39,809.0 45,220.0

ES - 9,349.0 18,651.0 24,462.0 21,260.0 50,173.0 50,607.0 51,071.0 51,606.0

FR - 11,452.0 5,896.0 801.0 - 2,585.0 2,654.0 2,720.0 2,780.0

HR - - - 61.0 62.6 91.9 95.0 98.6 168.4

IT - - 4,050.0 4,050.0 2,600.0 2,600.0 4,071.0 1,071.0 1,550.0

CY - - - - - 1,888.6 1,987.2 3,487.2 3,662.2

LV - 949.3 1,110.5 1,719.3 1,449.5 1,354.5 1,290.2 1,330.6 1,207.3

LT - - - 32.3 867.2 695.0 834.7 337.3 92.6

LU - 2,500.0 2,500.0 2,500.0 2,500.0 2,500.0 2,500.0 2,500.0 2,500.0

HU - - 1,758.0 995.3 498.9 - - - -

MT - - - - - - - - -

NL - 81,592.0 58,064.0 52,883.0 44,506.0 41,340.0 43,804.0 36,792.0 29,787.0

AT - 897.5 22,844.9 22,179.4 20,380.1 18,841.1 16,483.2 28,061.1 37,255.6

PL - - - - - - - - -

PT 150.0 547.6 1,535.4 6,399.5 7,266.2 14,722.1 15,277.2 16,925.4 20,609.8

RO - - - - - - - - -

SI - - 1,426.3 1,412.8 1,691.7 1,804.5 5,152.3 6,680.5 6,556.2

SK - - - - - - - - -

FI - - - - - - - - -

SE - 221.9 547.2 625.7 629.5 653.7 - - -

UK -1.4 66,683.5 127,473.3 205,474.3 192,936.7 185,302.0 163,584.0 162,520.2 131,424.5

Source: Eurostat

General government liabilities (mil. Euro)

25

2007 2008 2009 2010 2011 2012 2013 2014 2015

BE - 36,234.6 62,046.8 55,829.3 46,959.7 59,057.1 45,355.8 37,564.8 31,506.1

BG - - - - - - - - -

CZ - - - - - - 137.1 78.6 14.7

DK - - 7,148.8 27,169.5 22,369.6 9,471.8 1,270.5 692.7 -

DE - 66,300.0 159,030.0 82,801.0 61,931.0 50,255.0 36,860.0 22,174.0 22,178.0

EE - - - - - - - - -

IE - 352,329.0 281,176.0 156,979.2 137,404.0 114,240.0 54,709.0 23,838.0 11,299.0

EL - 1,890.0 5,617.0 55,834.0 67,801.0 54,111.0 51,145.0 51,110.0 44,726.0

ES - - 49,008.0 59,506.0 64,659.0 105,093.0 95,604.0 55,090.0 46,385.0

FR - 39,211.0 100,112.0 90,417.0 70,233.0 50,605.0 68,848.0 47,297.0 40,212.0

HR - - - - - - - - -

IT - - - - 43,715.0 85,679.0 81,679.0 23,375.0 6,421.0

CY - - 2,229.0 2,962.0 2,769.0 1,000.0 1,000.0 1,000.0 1,000.0

LV - - 663.0 355.8 127.2 127.6 126.6 - -

LT - - - - - - - - -

LU - 1,776.9 1,513.2 1,333.3 1,377.8 2,210.1 2,262.1 2,190.4 1,838.5

HU - - - - - - - - -

MT - - - - - - - - -

NL - 2,740.0 79,462.0 39,948.0 34,125.0 18,192.0 10,843.0 - -

AT - 7,000.0 16,550.6 15,630.0 10,048.4 6,383.6 3,155.6 100.0 1,700.0

PL - - - - - - - - -

PT - 1,750.0 8,350.0 5,275.0 15,850.0 16,525.0 16,275.0 6,300.0 6,300.0

RO - - - - - - - - -

SI - - 2,000.0 2,200.0 1,554.9 199.9 398.1 119.0 -

SK - - - - - - - - -

FI - 115.0 - - - - - - -

SE - 13,622.5 26,406.2 19,669.5 10,181.2 3,537.1 1,007.8 99.5 -

UK 36,721.9 325,007.9 620,685.7 424,720.3 201,364.8 9,802.7 - - -

Source: Eurostat

Contingent liabilities (mil. Euro)

26

III.1 Higher international reserves

0

4

8

12

16

20

24

28

32

36

40

44

48

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

banks' foreign exchange reserves

NBR foreign exchange reserves

gold

0

4

8

12

16

20

24

28

32

36

40

44

48

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Feb.

2017

NBR foreign exchange reserves

gold

Romania: International Reserves

EUR billion

Source: National Bank of Romania

Romania: Foreign Reserve Assets

EUR billion

III. Exchange rate stability

Net forex reserves increased

27

20

22

24

26

28

30

32

34

36

38

40

31 dec. 2012 31 dec. 2013 31 dec. 2014 31 dec. 2015 31 dec. 2016

Gross foreign exchange reserves Net foreign exchange reserves

EUR bln.

Source: NBR

III.2. Low exchange rate volatility

28

Exchange rate against euro

Source: Eurostat

0

1

2

3

4

5

6

7

Jan-0

9

Jun

-09

Nov-0

9

Apr-

10

Sep

-10

Feb

-11

Jul-

11

Dec

-11

May

-12

Oct

-12

Mar

-13

Aug-1

3

Jan-1

4

Jun-1

4

Nov-1

4

Apr-

15

Sep

-15

Feb

-16

EUR/CZK EUR/HUF EUR/PLN EUR/RON

Volatility of the exchange rate

against euro

80

85

90

95

100

105

110

115

Jan-0

9

Jul-

09

Jan-1

0

Jul-

10

Jan-1

1

Jul-

11

Jan-1

2

Jul-

12

Jan-1

3

Jul-

13

Jan-1

4

Jul-

14

Jan-1

5

Jul-

15

Jan-1

6

Jul-

16

Jan-1

7

EUR/CZK EUR/HUF EUR/PLN EUR/RON

Index (Jan-09=100)

Source: Eurostat, author’s calculations

International liquidity increased

Source: NBR

External debt

0

5

10

15

20

25

30

35

40

45

0

20

40

60

80

100

120

Mar

-07

Sep

-07

Mar

-08

Sep

-08

Mar

-09

Sep

-09

Mar

-10

Sep

-10

Mar

-11

Sep

-11

Mar

-12

Sep

-12

Mar

-13

Sep

-13

Mar

-14

Sep

-14

Mar

-15

Sep

-15

Mar

-16

Sep

-16

EUR billions EUR billions

Direct investments: intercompany lending

NBR

General government

Other sectors

Deposit taking corporations except the central bank

Foreign reserves (rhs)

0

20

40

60

80

100

120

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

percent

Note: Guidotti ratio = (Short term external debt

+ debt service of long term external debt in the

following 12 months)/ Foreign exchange reserves

Source: NBR

International liquidity

(Guidotti ratio)

29

International investment position has improved

30

Net international investment position

Source: Eurostat

-75

-70

-65

-60

-55

-50

-45

-40

Mar

-09

Jul-

09

Nov-0

9

Mar

-10

Jul-

10

Nov-1

0

Mar

-11

Jul-

11

Nov-1

1

Mar

-12

Jul-

12

Nov-1

2

Mar

-13

Jul-

13

Nov-1

3

Mar

-14

Jul-

14

Nov-1

4

Mar

-15

Jul-

15

Nov-1

5

Mar

-16

Jul-

16

percent of GDP

31

IV. Key messages

NBR has reached all three stabilities: price stability, financial stability and

exchange rate stability.

Low inflation, but no deflation.

Interest rates at historical lows stimulate local currency lending.

NBR contributed to reducing the risk of legislative uncertainty.

Romania is one of the 5 EU members which haven’t used public funds to

support the financial sector since the crisis hit.

Banks continued to clean-up their balance sheets from non-performing

loans.

Banks are well capitalized and liquid. Contagion risk declined.

Larger net foreign exchange reserves and improved international liquidity.