The banks in Romania that are "too big to fail"; Additional capital buffer required in 2019

The banks in Romania that are “too big to fail”; Additional capital buffer required in 2019

The National Bank of Romania (BNR) has revised last year the list of 9 systemic importance banks, replacing Bancpost, acquired by Banca Transilvania, with the local subsidiary of Hungary’s OTP. The systemic importance banks are required to have additional mandatory capital since January 1, 2019.

The list was revised on September 24, 2018, in a meeting of the National Committee of Macroprudential Surveillance, a body headed by BNR governor Mugur Isarescu.

The nine banks of systemic importance in Romania are BCR (controlled by Austria’s Erste Group), Raiffeisen Bank (controlled by Austria’s Raiffeisen International), Banca Transilvania (private Romanian bank), CEC Bank (state-owned Romanian bank), OTP Bank Romania, UniCredit Bank (controlled by Italy’s UniCredit group), BRD – Groupe Societe Generale (controlled by France’s Societe Generale), Alpha Bank Romania (controlled by Greece’s Alpha Bank) and Garanti Bank (controlled by a Turkish group).

The former 4 banks are required to have a capital buffer of 2 percent of their risk exposure since January 1, 2019, while the latter 5 banks are required to have a capital buffer of 1.5 percent.

A capital buffer is mandatory capital that financial institutions are required to hold in addition to other minimum capital requirements.

Regulations targeting the creation of adequate capital buffers are designed to reduce the procyclical nature of lending by promoting the creation of countercyclical buffers as set forth in the Basel III regulatory reforms created by the Basel Committee on Banking Supervision, according to Investopedia.com.