Return on equity, one of the main efficiency gauges monitored in the case of banks, dropped to 3.2% this September, as an average at the system level, from 19% last autumn, according to central bank data.

Banks in the first nine months of this year generated net cumulated income worth 680m RON (almost 160m euros), according to the reports filed with the NBR, based on domestic accounting standards.

"It's good that profitability is positive, as it had got into negative territory in March. However, compared with last September it registered a significant decline, by more than five times," says Florin Georgescu, first vice-governor with the NBR.

Banks' profits were eroded by the high expenses related to provisions set up to cover credit losses, in the context where a rising number of clients are having trouble in paying instalments. The NBR imposes much tougher conditions for the setting up of provisions compared with the international practice, allowing banks to deduct only 25% of the value of held real estate guarantees from the value of exposures.

Overdue and doubtful arrears in September came to account for 10.5% in banks' equity, over four times more than a year ago. Against banks' total assets, their weight climbed to 0.92% from 0.22% last September and 0.14% in December 2006.

"Loan portfolio quality deteriorated compared with last year. As long as the solvency indicator looks good and is rising, it shows us this asset deterioration was rightly and timely offset by new capital inflows," Georgescu considers.

In late September, solvency stood at 13.7%, flat from last December, but higher compared with the 11.9% reached in September 2008.

The weight of "standard" loans dropped from 66% a year ago to 60% in September 2009. The weight of "loss" loans climbed from 3.6% to 8.5%. Banks slowed down growth and shifted from a fo