An Overview: Romanian Banking System During the Crisis

One of the most important macroeconomics concepts there is the economic growth, whose anatomy and evolution are indispensable for understanding and influencing of unemployment, inflation, final product (materialized, usually, from more recurrent elements point of view, in GDP), a nation’ welfare, in a single word. As the independent forces acting on supply and demand are “kept on a tight hand” by the occurrences on the prices “market”, the same as, the saving and investment decisions are controlled and influenced by what happens at the level of income (fiscal policy domain) and of monetary base → money supply → interest rate (monetary policy attribute). Little components of the economic policy are so, as important for the welfare of a nation as monetary policy. Its acting field consists of the terms and conditions money and credit are supplied to the economy. It is worth to be mentioned that monetary policy is neither a scope itself, nor an universal panacea. In the very moment the general expenditures are too large thus allowing prices to have an inflationist trajectory, monetary authority (central bank) will shrink the growing rhythm of money supply (draining reserves). If unemployment has reached alarming levels and investments are languishing, the sense of the central bank action will be reversed, it operating to expand the money supply (liquidity injection). In Romania the main bank’s activity is lending operation. Indeed, between banks' placements in first place stand the credits. The way in which banks allot the funds they manage can influence a decisive economic development locally or nationwide. On the other hand, any bank will assume, to some extent, risks when granting credits and, certainly, all banks currently register losses in the credit portfolio, when some borrowers does not honor their obligations. But whatever the risks, the credit portfolio losses can be minimized if credit operations are organized and managed professionally. From this point of view, the most important feature of the bank's management is to control the quality of the credit portfolio. This is because the poor quality of loans is the main cause of the banking failure. The IMF Guide recommends that loans and other assets should be classified as non-performing when rates representing principal and interest payment are overdue 90 days or more. Non-performing loans will also include loans with debt service less than 90 days which are considered by national law as non-performing when there are clear indications of the non-reimbursing situation or bankruptcy.