Positive developments in a gradual catching up

By Gabriela Folcut Executive Director, Romanian Association of Banks

Almost one year after the onset of the COVID- 19 pandemic in Romania, studies mention an increase in the level of financial inclusion and in digitalization, all across the banking sector. Lending data showed a 4% advance in non-government credit in November 2020, while the economy shrank by 5.2%, according to estimates. Thus, paradoxically, we could be witnessing an increase in financial intermediation starting from 25%. In turn, saving increased by 15% during 2020.

Even if now our analysis is based on November data, there are prerequisites for a gradual catching up if we are to compare Romania to the European Union Member States on financial inclusion and intermediation levels. 
According to the survey, “The digitalization of the banking sector as perceived by the Romanians,” drawn up in December 2020 by the Romanian Institute for Evaluation and Strategy (IRES), two out of three Romanians (67%) use a type of banking product and service such as a current account, a card, a loan or a deposit and make payments. In 2017, Romania ranked last in the EU in terms of financial inclusion (58%), far behind the countries ranked immediately above, i.e. Bulgaria (72%), 
Hungary (75%) and Poland (87%). The EU average of unbanked individuals stood at 5%.
The IRES survey states that 16% of the respondents using banking products and services have a personal loan, 11% have an outstanding mortgage/real estate loan, 36% have a credit card  (shopping card), while 7% of respondents have an overdraft facility. A customer can use simultaneously several banking products and services. The survey took place in December 2020 on a sample of  1,479 adult respondents, of which 1,158 are users of banking services, the maximum tolerated error being +/- 2.8%.
 Currently, about 79% of the users of banking products and services make use of a current account  (including a payroll card). Men aged 36-50 and having a degree rank first in the top of current account users. The survey does not show a gap as regards the usage of current accounts by the population living in rural areas (79.5%) compared to those living in urban areas (77.9%).
Concerning saving now, 14% of respondents have bank deposits and also 14% of them bet on savings accounts. Moreover, during the pandemic, about four out of ten Romanians have managed to save (39%), taking into account that before the pandemic outbreak, in an ordinary month, two thirds of the respondents (68%) managed to save. Despite a lower weight of the people who save, the COVID-19 pandemic has brought about an acceleration in the growth speed of customer deposits up to 15% annually, i.e. by 3-4 percentage points over the level reached before the pandemic. The deposit balance stood at 410 billion lei, according to the data for November 2020. The fast advance of saving in the context of the pandemic tells us that the population and companies have considered the Romanian banking sector a safety belt, namely the depository of their money and not merely a shock buffer of the healthcare crisis; this was so due to the support via new financing granted to the customers who had liquidity problems. 
Two thirds of the savings of the population and of companies is denominated in the domestic currency, the rest of the savings being in foreign currency. The bulk of deposits are short-term deposits, less than one year, that is. About 61.4% of the saving balance deposited in banks belong to the population. At the end of Q3 last year, the number of depositors in the credit institutions members of FGDB (Bank Deposit Guarantee Fund) stood at 14.9 million, of which 13.8 belonged to individuals. A depositor who has several deposits with several banks is recorded in the  statistical record several times. The ceiling of the deposit guarantee is €100,000, the lei equivalent, per depository, per bank.
The survey  demonstrates the increase in digitalization compared to the previous years, this trend being accelerated, among others, by the sanitary protection measures adopted during the pandemic. Among the users of financial services, 43% make card payments at merchants  (POS), 27% pay via Internet/Mobile Banking while 61% of respondents mentioned that they withdraw money from ATMs (the question being a multiple choice question). The card usage behaviour shows a cut by 30% in the weight of the people who withdraw cash from ATMs compared to five years ago. 14% of the users of the Mobile Banking application use it daily, just like 10% of the users of Internet Banking, smartphones being the device mostly used to access the Internet/Mobile Banking service. 
These developments – in the indicators object of comparisons – have created the prerequisites for a moderate but safe advance toward the EU averages that we have as targets. However, Romania still has a long way to go in order to catch up in terms of GDP/capita,  but the enhancements in the usage of banking services and products, in digitalization and in financial intermediation represent the start of the consolidation of a trend to increase economic welfare in general. 
The banking industry has a key role as regards the smooth functioning of economic and financial mechanisms, with impact on macroeconomic developments, the dynamics of the business environment and the improving of  economic prosperity in Romania.
The role of the banking sector pertains to assuring financial intermediation, one of the main goals being to protect the savings of the population and of companies. The banks operating in  Romania have the resources needed for lending, the loan/deposit ratio standing at 68.88% at the end of September 2020, while the solvency ratio is almost three times higher than the accepted minimum, standing at 22.76%.

This is also available in our print edition of Business Arena.

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