Subprime crisis: Romania to undergo limited or no subprime effects

Newsroom 04/03/2008 | 17:50

“Unlike many US and Western European players, SEE banks are not at all involved in any subprime or subprime related investments and therefore need no writing-off of their assets. On the funding side, however, the crisis has affected the liquidity of the EUR currency,” said analysts.
The evolution of the US market should not be compared to Romania in all material aspects, said Millennium Bank general manager Jose Toscano.
“The reasons why this argument is sustainable are: the US credit boom was not shared by any country from continental Europe (except Spain), so the same excess does not need to be replicated; loans to GDP ratios are close to 55 percent in Romania compared to 200 percent in the US and the credit growth has never been as important in driving the growth of the economy in recent years; the unemployment level in Romania is one of the lowest in the region, forecasts follow the same pattern for the coming years; and Romania is an emerging market where growth is booming,” said Toscano.
He concluded that the US subprime crisis was not going to affect Romanian market, but lenders may face liquidity constraints.
Dragos Cabat, the head of Chartered Financial Analysts (CHF) Romania, said he did expect some effects of the events in the US to
show up in Europe in the coming months.
“It is very likely that we will see that the financing criteria for European banks will get harsher and some lenders' ratings will drop. Under these circumstances, emerging states will be affected by ‘stricter' evaluations from ratings agencies as well,” said Cabat. “The Romanian banking system is vulnerable on account of its integration into the European banking system via parent-banks, in the first place, and its dependence on the macro-economic conditions in the country, which are also affected by developments at a European level, in the second place,” said Cabat.

By Ana-Maria David

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