If Necessary, BNR Could Use Greek Banks' Properties As Loan Guarantees

05.27.2011 ZF English

The Romanian central bank, or BNR, has tools to intervene if crisis scenarios prompted by the situation in Greece become a reality on the Romanian banking market, starting from the bilateral repo of government securities held by Greek-owned banks to using the buildings housing their offices as guarantees for loans, BNR sources told ZF.

"BNR has the mechanisms to provide liquidity to banks, including through asset-guaranteed loans. As a last resort, after financing through bilateral repo would run out (i.e. supplying liquidity in exchange for government securities straight from the central bank to a bank facing a liquidity shortage), there is also the possibility of holding the bank's registered offices as collateral, which would of course entail diminishing its registered value," the sources said.

They added the current valuations do not offer support for a scenario in which the local subsidiaries of Greek banks would face withdrawals of large amounts due to spillover from Greek tension.

"If something should be done, the central bank as a supervisory and regulatory authority will act. It all depends on what happens with the parent banks, and in Greece there already is a mechanism to support financial groups as part of the financing arrangement sealed last year with the IMF. The Greek state will inject capital if needed," the sources said.

Romania has two Greek banks in the top 10, Alpha Bank (controlled by Alpha Bank Greece) and Bancpost (controlled by EFG Eurobank), which through their positions both on the individual client segment and on the corporate segment, have a systemic importance on the Romanian market, cumulating over 10% of the assets.Two other Greek-controlled banks ranking 11th and 12th, Piraeus (Piraeus Greece) and Banca Romaneasca (National Bank of Greece-NBG), cumulate nearly 5% of the market.

The main threat looming over the Romanian banking system since the Greek crisis has reached a size difficult to anticipate two years ago, is of Greek banks ending up in a position where they have to cut financing to local subsidiaries, sell assets and even ask for financing to be repaid ahead of maturity.