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Impact of COVID-19 Crisis on Banking Sector in Romania

In: Economic Recovery After COVID-19

Author

Listed:
  • Dumitru Ionut

    (Bucharest University of Economic Studies)

  • Dumitrescu Bogdan-Andrei

    (Bucharest University of Economic Studies)

  • Cepoi Cosmin Octavian

    (Bucharest University of Economic Studies)

  • Pop Ionut Daniel

    (Bucharest University of Economic Studies)

  • Barnea Dinu

    (Bucharest University of Economic Studies)

  • Kubinschi Matei-Nicolae

    (Bucharest University of Economic Studies)

  • Tatarici Luminita

    (Bucharest University of Economic Studies)

Abstract

Postponing debt payment in the context of a lockdown of the economy in Romania during COVID-19 pandemic was a logical and beneficial step for all stakeholders. The analysis performed concludes that the solutions proposed both by GEO no. 37/2020 and the Law approving it are not likely to significantly affect the liquidity position of commercial banks in Romania, as they are able to absorb the shock. Also, the macroeconomic shock of COVID-19 may lead to a significant increase in the volume of non-performing loans, with subsequent negative effects on the banking sector's ability to lend to the real economy. In the context of the COVID-19 pandemic, the reduced-form stress testing exercise indicates a potential increase in the non-performing loans (NPL) rate in Romania, up to a level of approximately 12% in the adverse scenario, over a 2-year horizon. The simulations performed indicate that the banking sector can make a substantial contribution to limiting the economic contraction of 2020 and 2021 and thus to reducing business cycle volatility.

Suggested Citation

  • Dumitru Ionut & Dumitrescu Bogdan-Andrei & Cepoi Cosmin Octavian & Pop Ionut Daniel & Barnea Dinu & Kubinschi Matei-Nicolae & Tatarici Luminita, 2021. "Impact of COVID-19 Crisis on Banking Sector in Romania," Springer Proceedings in Business and Economics, in: Alina Mihaela Dima & Ion Anghel & Razvan Catalin Dobrea (ed.), Economic Recovery After COVID-19, pages 125-155, Springer.
    • Handle: RePEc:spr:prbchp:978-3-030-86641-9_7
    DOI: 10.1007/978-3-030-86641-9_7
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