RESTRUCTURING OF LOANS – NECESSITY AND EFFECTS IN ROMANIAN BANKING ACTIVITY

Abstract

Banks will use specific tools to develop and compare alternative scenarios to determine what the opportunities to restructure a loan are, and to identify the most appropriate bargaining levers. Restructuring activity involves early identification of the problem and empowering teams consisting of bank specialists to solve the magnitude of the existing intervention. After analysing the unfavourable situation of the customer they perform the necessary steps to implement and monitor the restructuring solution. Also, banks are following and evaluating the risks associated with the restructuring of loans to cover up or avoid the occurrence of effects that will degrade the good functioning of things. Customers should be informed about the restructuring process to see what kind of measures can be taken to improve their financial situation. They can solve their financial difficulties by changing the monthly payments and their business activities. The issues that affect the customers are the increased payment amounts and the time when those payments have to be made. In case of insolvency, the banks resort to the judicial reorganization of the clients' activity, in order to avoid enforcement or bankruptcy of the company, which will create negative repercussions on the functioning of the bank's financial system but also on the image created by this. This paper aims to analyse the implications of the restructuring of loans for banks and customers. The analysis has been conducted by using an econometric study based on annual data of banks active in Romania.