All views expressed are those of the author and do not necessarily represent the opinions of and should not be attributed to the National Bank of Romania. BANCA NAŢIONALĂ BANCA ROMÂNIEI A
Monitoring the lending developments to non-financial companies (NFC) and households (HH) 1. Why is it important? 2. How it is done? 3. The Romanian case
The borrower balance sheet channel the inability of lenders to (i) fully assess borrowers risks and solvency, (ii) fully monitor their investments and (iii) fully enforce their repayment of debt Bernake and Gertler (1989); Carlstrom and Fuerst (1997) - borrowers face an external finance premium Kiyotaki and Moore (1997) collateral constraints The bank balance sheet channel shocks in financial institutions balance sheets can entail sharp contractions in credit and in economic activity Bernake and Blinder (1988) - traditional bank lending channel Holmström and Tirole (1997), Stein (1998), Heuvel (22) etc. - bank capital channel The liquidity channel 1. Why is it important? Many channels of interaction between real and financial sectors: Diamond and Rajan (25), Brunnermerier and Pedersen (29) etc. highlighted by recent crisis
1. Why is it important? NFC and HH have an important role in the European MFIs balance sheets Structure of European MFIs loans (September 213) Other financial institutions 8% NFC 23% Insurance corporations and pension funds 1% 7 6 5 of total assets Deposits from NFC Deposits from HH MFIS 31% 4 3 2 General Government 5% HH 32% 1 - SK BG CZ LT HR PL RO EE SL BE GR HU CY PT AT DE ES IT LV NL FI MT FR GB SE DK IE LU Source: ECB, NBR calculations Source: ECB, NBR calculations
Mar-9 Jun-9 Sep-9 Dec-9 Mar-1 Jun-1 Sep-1 Dec-1 Mar-11 Jun-11 Dec-11 Mar-12 Jun-12 Dec-12 Mar-9 Jun-9 Sep-9 Dec-9 Mar-1 Jun-1 Sep-1 Dec-1 Mar-11 Jun-11 Dec-11 Mar-12 Jun-12 Dec-12 1. Why is it important? The credit risk stemming from NFC and HH exposure should be closely monitored.. NFC, NPL ratio* HH, NPL ratio* 25 18 16 2 14 15 1 5 HU PL SK LT CZ RO 12 1 8 6 4 2 *Data are not fully comparable across countries, due to differences in national classification practices Source: European NCBs websites, NBR calculations
LU CYP* IE DK SE PT BE NL MT ES UK FI AT FR HU EE IT GR SL DE LV CZ PL SK RO LT 1. Why is it important?.and also supports the need for a rethinking of what represents a sustainable level of debt 4 35 3 25 2 15 1 5 age of GDP (213 Q2) HH debt NFC debt * Data as of 212 Note: non-consolidated data Source: ECB
1. Why is it important? European initiatives: -focus on SMEs: joint Commission-EIB initiative for increasing SMEs access to finance (213); Funding for Growth Scheme (HU, 213); Funding for Lending Scheme (UK, 212) -shift to long-term financing (EC, Green Paper, 213) -encourage banks to clean their balance-sheets (EBA, 213) in order to boost economic growth by new lending to sound borrowers
2. NFC and HH monitoring- how it is done? Financial Stability Reports (18 out of 24 EU countries that publish FSRs have distinct sections on NFC and HH) Bank lending surveys (25 out of 28* countries, including RO) HH Finance and Consumption Survey EA (213)** ; other HH surveys Surveys on the access to finance of enterprises - EC and ECB on 38 countries; ECB on EA17; LT; RO etc. Other publications on NFC and HH developments (Trends in lending- HU; Survey of households with a housing loan LT etc.) *ECB publishes BLS at aggregate level for EA countries; NCBs of the Member States can also decide to publish BLS at country level, compiled after the data reported by the domestic banks from the EA banks pool **15 EA countries participated in the first wave of the survey, with the fieldwork taking place in 21/211. Ireland and Estonia will start participating in the HFCS from the second wave of the survey
AT BE HR CZ EE GR HU IE IT LV MT PL PT SL ES RO 2. NFC and HH monitoring- how it is done? Tools for monitoring NFC sector: 1 9 8 7 6 5 4 3 2 1 interest coverage ratio loans, growth (total) loans, by size of debtor loans, by sector loans, by lender's origin interest rates on loans impaired loan ratio debt/gdp (%) debt, growth (total) Source: European NCBs websites
AT BE HR CY CZ EE GR HU IE IT LT MT PL PT SL ES SE RO 2. NFC and HH monitoring- how it is done? Tools for monitoring HH sector: 8 7 6 5 4 loans, growth loans, by purpose interest rates on loans interest/income 3 impaired loan ratio 2 1 debt/gdp debt, growth (total) debt/disposable income Source: European NCBs websites
Jan-8 May-8 Sep-8 Jan-9 May-9 Sep-9 Jan-1 May-1 Sep-1 Jan-11 May-11 Jan-12 May-12 Jan-13 May-13 Sep-8 Dec-8 Mar-9 Jun-9 Sep-9 Dec-9 Mar-1 Jun-1 Sep-1 Dec-1 Mar-11 Jun-11 Dec-11 Mar-12 Jun-12 Dec-12 Mar-13 Jun-13 3. The National Bank of Romania financial stability perspective in monitoring NFC and HH lending developments total lending and nonperforming loans (NPL) 25 lei bln. 9 4 lei bln. 25 2 15 1 8 7 6 5 4 3 35 3 25 2 15 2 15 1 5 2 1 - (1) 1 5 5 NFC loans, volume NFC loans, annual growth rate (rhs) HH loans, volume HH loans, annual growth rate (rhs) Source: Monetary balance sheet, NBR calculations Non-peforming loans, NFC NPL ratio NFC (rhs) Non-peforming loans, HH NPL ratio HH (rhs) Note: The non-performing loan ratio is calculated as the share of loans granted to NFC/HH overdue for more than 9 days or for which legal proceedings have been opened (with company or natural entity contamination) in total loans to NFC/HH Source: Central Credit Register, NBR calculations
Sep-8 Dec-8 Mar-9 Jun-9 Sep-9 Dec-9 Mar-1 Jun-1 Sep-1 Dec-1 Mar-11 Jun-11 Dec-11 Mar-12 Jun-12 Dec-12 Mar-13 Jun-13 Sep-9 Dec-9 Mar-1 Jun-1 Sep-1 Dec-1 Mar-11 Jun-11 Dec-11 Mar-12 Jun-12 Dec-12 Mar-13 Jun-13 3. NFC and HH monitoring by National Bank of Romania 1% 8% 6% 4% 2% % -2% decomposition of y-o-y change of the NPL ratio for NFC (left) and HH (right) sectors 4.5% 4.% 3.5% 3.% 2.5% 2.% 1.5% 1.%.5%.% -.5% -1.% effect of the change of total loans' volume effect of the change of nonperforming loans' volume annual change of NPL ratio effect of the change of nonperforming loans' volume effect of the change of total loans' volume annual change of NPL ratio Note: decomposition with the use of partial derivatives calculus: NPL 1 NPL Loans Loans NPLt Loans 2 t t Loans Source: Central Credit Register, NBR calculations Source: Central Credit Register, Credit Bureau, NBR calculations
Jan-9 May-9 Sep-9 Jan-1 May-1 Sep-1 Jan-11 May-11 Jan-12 May-12 Jan-13 May-13 3. NFC and HH monitoring by National Bank of Romania lending, by currency Total loans, volume Growth rate of loans granted to NFC and HH (annual nominal change) lei bln. 25 6 NFC loans, lei NFC loans, FX 5 2 HH loans, lei HH loans, FX 4 15 3 2 1 5 - Dec-9 Dec-1 Dec-11 Dec-12 1 - (1) (2) NFC loans, lei HH loans, lei NFC loans, FX HH loans, FX Note: 3 month moving average Source: Monetary balance sheet, NBR calculations
Jan-9 Ma y-9 Sep-9 Jan-1 Ma y-1 Sep-1 Jan-11 Ma y-11 Jan-12 Ma y-12 Jan-13 Ma y-13 Sep-8 Dec-8 Mar-9 Jun-9 Sep-9 Dec-9 Mar-1 Jun-1 Sep-1 Dec-1 Mar-11 Jun-11 Dec-11 Mar-12 Jun-12 Dec-12 Mar-13 Jun-13 3. NFC and HH monitoring by National Bank of Romania NPL ratio, by currency NFC HH 25 2 NPL lei NPL FX 2 18 16 NPL lei NPL EUR NPL FX NPL CHF 14 15 12 1 1 8 6 5 4 2 Source: Central Credit Register, NBR calculations Source: Central Credit Register, Credit Bureau, NBR calculations
Jan-9 May-9 Sep-9 Jan-1 May-1 Sep-1 Jan-11 May-11 Jan-12 May-12 Jan-13 May-13 Jan-9 May-9 Sep-9 Jan-1 May-1 Sep-1 Jan-11 May-11 Jan-12 May-12 Jan-13 May-13 3. NFC and HH monitoring by National Bank of Romania NFC lending and NPL ratio by business sector 14 lei bln. 35 12 3 1 25 8 2 6 15 4 1 2 5 - Total loans, Agriculture Total loans, Trade Total loans, Construction and Real-estate Total loans, Industry Total loans, Services and Energy NPL Agriculture NPL Trade NPL Construction and Real-estate NPL Industry NPL Services and Energy Source: Central Credit Register, Ministry of Public Finance, NBR calculations
Jan-9 May-9 Sep-9 Jan-1 May-1 Sep-1 Jan-11 May-11 Jan-12 May-12 Jan-13 May-13 Jan-9 May-9 Sep-9 Jan-1 May-1 Sep-1 Jan-11 May-11 Jan-12 May-12 Jan-13 May-13 3. NFC and HH monitoring by National Bank of Romania NFC lending and NPL ratio by size of debtor 12 lei bln. 5 1 45 4 8 35 3 6 4 25 2 15 2 1 5 - - Total loans, Corporations Total loans, Small-sized enterprises Total loans, Micro-enterprises Total loans, Medium-sized enterprises NPL Corporations NPL Small-sized enterprises NPL Micro-enterprises NPL Medium-sized enterprises Source: Central Credit Register, Ministry of Public Finance, NBR calculations
Sep-8 Dec-8 Mar-9 Jun-9 Sep-9 Dec-9 Mar-1 Jun-1 Sep-1 Dec-1 Mar-11 Jun-11 Dec-11 Mar-12 Jun-12 Dec-12 Mar-13 Jun-13 Sep-8 Dec-8 Mar-9 Jun-9 Sep-9 Dec-9 Mar-1 Jun-1 Sep-1 Dec-1 Mar-11 Jun-11 Dec-11 Mar-12 Jun-12 Dec-12 Mar-13 Jun-13 3. NFC and HH monitoring by National Bank of Romania HH lending and NPL ratio by type of loans lei bln. 12 1 8 16 12 6 8 4 2 4 Real-estate loans Mortgage backed consumer loans Non-mortga ge ba cked consumer loa ns Credit card Overdra ft NPL real estate loans NPL mortgage backed consumer loans NPL non-mortgage backed consumer loans NPL credit card NPL overdraft Source: Central Credit Register, Credit Bureau, NBR calculations
3. NFC and HH monitoring by National Bank of Romania HH lending and NPL ratio by type of loans and currency (September 213) 4 3 lei bln. Loans, lei Loans, FX 3 25 2 lei bln. 4. 3.5 3. 2.5 2 15 2. 1 1 5 1.5 1..5 Real-estate loans Mortgage backed consumer loans Non-mortgage backed consumer loans Credit card Overdraft Source: Central Credit Register, Credit Bureau, NBR calculations Real-estate loans NPL, lei Mortgage Non-mortgage backed backed consumer loans consumer loans Non-performing loans, lei (rhs) NPL, FX Credit card. Non-performing loans, FX (rhs)
Thank you!