The provisions set aside by banks stood at 8.75 bln lei at the end of January 2009, 120% more compared to prior-year period, of which nearly three quarters were to cover bad loans or loan write-offs, data released by National Bank of Romania show.
More money set aside by banks
At the end of December 2008, the valuation reserves totaled 7,58 bln lei, 15.3% below the level of January 2009. At the end of first month of 2008, the provisions amounted to 3.96 bln lei.
On January 31, 2009, the banks’ provisions destined to cover bad loans (with a default in payment for 90 days) equated 6.65 bln lei.
A provision is a pool of cash set aside to cover predictable losses in the future resulted from current activity, and they appear on a bank’s income statement as an operating expense.
For loans deemed as standard assets, the valuation allowance in banks reached 549.6 million lei at the end of first month this year, while for loans 16-30 days past due, the banks provisioned 512.5 mln lei.
For substandard loans, the reserves reached 497.5 million in the aforementioned period, while for nonaccruing loan, the lenders set aside 538.1 million lei, NBR informs.
Population’s loan default rates reached 1.126 bln lei, up 15% from 981.2 million lei from end-2008 and nearly double against prior-year period.
The payments 90 days past due accounted for 905.2 million lei, while loans removed from balance hit 92.7 mln lei.
Special recommendation for seven banks
NBR recommended seven banks to keep the solvability rates above 10%, after a sharp deterioration of seven banks’ credit portfolios, said Nicolae Cinteza, head of the supervisory division at NBR.
The minimum solvability level recommended for seven banks is at 8%, while for the Romanian banking system, the median solvability was at 13.34% at the end of last year, NBR info
