Credit risk, political interference and currency risks are the main concerns in a list of 30 worries that keep bankers up at night. The list also includes the country’s macro-economic trend and risk management quality.
Credit risk is what tops bankers’ worry list, as is seen as the main threat to the local banking system according to the latest “Banking Banana Skins” survey conducted by the Centre for the Study of Financial Innovation (CSFI) in association with PricewaterhouseCoopers.
RankConcerns1.Credit risk2.Political interference3.Currencies4.Macro-economic trends5.Risk management quality6.Equities7.Fraud8.Credit Spreads9.Derivatives10.Business continuation11.Too much regulation12.Capital availability13.Emerging markets14.Hedge funds15.Commodities16.Environmental risk17.Interest rates18.Corporate governance19.Money laundering20.Retail sales practices21.Rogue trader22.High dependence on technology23.Liquidity24.Conflicts of interest25.Back office26.Management incentives27.Payment systems28.Merger mania29.Competition from new entrants30.Too little regulation
Even though in Romania, there are only two state-run banks, bankers are concerned by the possible political interference that would hurt their profits and activity.
The outlook of banking in Romania seems difficult to predict. Fears were expressed about the weakness of the economy and its impact on banks through rising loan defaults and declining profitability.
In a worst-case scenario, Greek banks would pull out a part of their capital from their Romanian subsidiaries, due to the severe debt crisis that has crippled Greece’s banking system.
Another fear is that risk aversion in banks will delay the economic recovery. The initial predictions had suggested that Romania’s GDP would turn positive to 1.3% in 2010, but economists are still cautious and say the country will emerge
