The deleveraging of foreign banks vis-à-vis Romania has continued in Q1 this year, but it eased after the foreign banks reduced their exposure significantly in H2 last year. Based on BIS data, we calculated 2.8% of GDP deleveraging over the past three quarters ending Q1, 2012. Out of this, only 0.4% of GDP was achieved in Q1, 2012. The deleveraging was softer than the 3.3%-of-GDP average deleveraging in CESEE region excluding Russia and Turkey where it reached 3.3% of GDP over the three-quarters period. Out of this, only 0.3pps was achieved in Q1. Nonetheless, the deleveraging pressures have gained ground through the year and the risk for significant withdrawal of resources from the region is on the rise as the economic outlook in Europe deteriorates.
For the exposure vis-à-vis the Romanian banking sector alone, the deleveraging was 1.4% of GDP in past three quarters and 0.4% of GDP in Q1 alone. BIS-reporting banks maintain significant exposure to Romania – of USD 53.5bn 31% of GDP) at the end of March, out of which USD 32.9% (19.0% of GDP) against local banks – mostly own subsidiaries. This indicates their commitment to continue businesses in the country, but also the large magnitude of the deleveraging that might occur in case unexpected deterioration in the internal or external climate.
Much more in the Emerging Markets Direct report: Romania Financial Sector