Romanian Banking Sector Research Articles

BANKING INSTITUTIONS AND AGGREGATED INDICATORS FOR FINANCIAL STABILITY ON THE ROMANIAN BANKING MARKET

In times of crisis, the behaviour of the participants in the economic process changes, they being forced to adapt to new times, at a rapid pace. It reflects prudence and a reorganization from all points of view regarding the activities of companies. The scientific research aims to analyse the behaviour of banking institutions in times of crisis, but also in periods of economic growth based on aggregate indicators that reflect the evolution of banking financial institutions over a period of 15 years, starting from the economic crisis from 2008 and ending with 2022. At the same time, the scientific approach makes a brief presentation of Romanian banking sector at the end of 2022 from the perspective of shareholding and market share for the main banks in Romania in order to better understand their position these in the market.

The Influence of the COVID-19 Pandemic on the CSR Practices in the Romanian Banking Sector

Abstract The COVID-19 pandemic has rapidly changed the Romanian banking sector, which was forced to adapt to digital technologies and to provide accessible banking services for all kinds of custsomers. The corporate social responsibility practices evolved during the pandemic, from general causes to more targeted initiatives, the Romanian banks offering innovative solutions to fight against the health crisis. The present paper provides a good insight in the corporate social responsibility practices before the pandemic and during the COVID-19 crisis, exploring the best practices of the most representative banks in terms of total assets. The investigation covers five years, from 2017 to 2021, and was based on a content analysis of the sustainability reports of the banks from the sample. The data was processed through the MAXQDA software, revealing a clear correspondence between the corporate social responsibility practices of the banks and the theoretical concept of sustainability: Profit – People – Planet. The qualitative analysis was completed by a quantitative investigation based on a questionnaire applied on a sample of 344 respondents. The comparative analysis outlines the moral implications of corporate social responsibility in the COVID-19 unique environment, considering the balance between the individual health of clients/employees and the profit dimension of corporate social responsibility. The paper focuses on the recovery stages of the banking sector after the critical point of restriction measures, emphasizing the clients’ perceptions and attitudes towards digital banking, as a form of social care during pandemic. The banks responses to the COVID-19 pandemic were examined by using a sequential mixed-methods approach, suggesting an amplified economic dimension of corporate social responsibility during the COVID-19 pandemic through digital banking services.

Does it pay off to invest in bank staff training? Survey‐based evidence from an emerging market banking sector

AbstractWe explore the role of staff training and experience for banks' efficiency and profitability, while accounting for size, solvency, liquidity and business model of the banking sector. We try answering two questions: (i) are banks with higher levels of staff training and experience more efficient and profitable and (ii) do banks that spend more to increase the quality of their staff have better outcomes in terms of NPLs, in case of a downturn? We use two novel sources of microdata from a one‐off survey about banks' HR policies and a database on banks' balance sheets and P&Ls regarding the Romanian banking sector. We apply the Data Envelopment Analysis (DEA) approach to estimate production frontiers and rank banks by cost and income efficiency. Our main findings support the conclusion that it pays off to invest more in the quality of bank staff, from both risk management and revenue efficiency perspectives.

The impact of the Covid-19 pandemic on the deposits in the Romanian banking sector

The business cycle and a crisis period within an economy can influence significantly the level of Total Deposits to Total Assets (TA). We aim to assess this issue by studying the effects of Covid-19 pandemic on the ratio of Total Deposits to TA in the Romanian banking sector in the span 2000-2022. Our findings show that Covid-19 pandemic influences significantly and positively the traditional activity of banks, depositing the savings of population. Further, we bring new insights regarding the effects of BET Index’ volatility on the Total Deposits to TA ratio. These results remain robust when we employ subcategories of deposits as dependent variables in our empirical models (e.g., households deposits, deposits granted to non-financial corporations, deposits granted to financial corporations, and deposits granted to government).

Corporate Social Responsibility of the Romanian Banking Sector During the COVID-19 Crisis: Customers’ Perceptions and Financial Implications

The COVID-19 pandemic has substantially transformed the individuals’ lives, affecting various industries and accelerating digitalization in almost all activity fields. The paper presents the way in which the banking sector has adjusted the financial services features in order to help the community during the health crisis, shaping the main opportunities offered by the new COVID-19 context for the Romanian banking sector. In the same time, the paper aims to analyze the clients’ perceptions of the banks’ CSR actions during COVID-19 crisis, suggesting the supportive role of the banks and the increased solidarity through digitalization. The customers’ expectations were addressed in correlation with a SWOT analysis applied to the most representative credit institutions by total assets. The investigation was based on a semi-structured questionnaire focused on the assessment of the CSR efforts of the banks to overcome the COVID-19 pandemic, correlated with a SPSS analysis. According to the research findings, pandemic has redesigned the Romanian banking sector, being a primary starting point to rewrite the CSR strategies to improve the organizational resilience of banks. The main lines of investigation focused on how banks can cope with complex crisis by highlighting the features of the most resilient banks, expanding the use of digital banking and linking the banks’ CSR approach to clients’ demand for digital services after the outbreak of the COVID-19 crisis.

Improving the Organizational Resilience during COVID-19. An Analysis of the Romanian Banking Sector

Improving the Organizational Resilience during COVID-19. An Analysis of the Romanian Banking Sector

THE IMPACT OF THE CUSTOMER-BASED CORPORATE REPUTATION SCALE ON THE BEHAVIOURAL INTENTIONS

This paper intends to be a brief and comprehensive presentation about the mode in which the reputation of an economic institution may influence the behavioural intentions of consumers. Thus being a qualitative indicator, based upon the perceptions of the interested parties, reputation may act upon the behavioural intentions in manifold modes. The literature review and the case study had at their core the usage of the dimensions of the customer-based corporate reputation scale (CBR scale). A questionnaire was used for the case study, with applicability in the Romanian banking sector. The conclusions of this research show the fact that each dimension acts in a different mode upon the behavioural intentions of the consumers.

The impact of COVID-19 on consumer behavior in retail banking. Evidence from Romania

Abstract The pandemic COVID-19 has severely affected the global economy. The strict lockdown measures have also changed the daily live, including consumer behavior in retail banking. In this context, the purpose of this paper is to investigate the impact of the COVID-19 crisis on consumer behavior in retail banking, with a special focus on the Romanian banking sector. To achieve our goal, we performed a survey among the Romanian consumers in retail banking, using as research method the field survey based on questionnaire. The final sample comprised 738 valid responses from the metropolitan area retail banking consumers. The research brings a fresh insight on retail banking services consumption during the pandemic and validates a conceptual model regarding the internet and mobile banking services acceptance. The research’ results highlighted, among others, that the variable concerning the perception of the COVID-19 pandemic effect on consumers’ lifestyle has a direct and positive influence on the variable regarding the attitude toward internet and mobile banking services, mediated by other variables like safety of internet and mobile banking use and trust in banks. Several social and managerial implications are also discussed, because it is possible that the tendency to use internet and mobile banking services will prevail even after the post pandemic stage, as new consumption behavior models are developing. Banks in Romania should increase their initiatives to offer financial education courses and online tutorials to familiarize customers with the use of digital channels. Banks should also improve communication with clients and design new products and services to increase the attractiveness of saving process. They should demonstrate flexibility in negotiating lending and refinancing conditions as well.

Environmental, Social and Governance Risks – New Challenges for the Banking Business Sustainability

The present paper highlights the need to adopt sustainability strategies in the Romanian banking sector, from the perspective of the importance of the role of financial intermediary that commercial banks have, also reflecting the positive impact of these strategies on financial performance. The empirical study involved the use of linear regressions and processing by a program specialized in statistics and data science (Stata), and emphasizes the impact of environmental, social and governance (ESG) factors on Romanian banks and the opportunity to implement them in their own risk management strategies. For this purpose, were considered independent variables, at the microeconomic level: return on assets, the leverage multiplier, the credit-deposit ratio, the number of members of the management body, and at the macroeconomic level: the unemployment rate, the inflation rate and the growth rate of the Gross Domestic Product. The dependent variable used was the dummy variable called ESG. The results of our research show that, as the return on assets or the leverage multiplier increases, the probability that the bank implements a risk management strategy associated with environmental, social and governance factors decreases, and the number of members of the management body positively impacts the decision to get involved in social responsibility activities. Through this research was assessed the opportunity to integrate the risks associated with sustainable development within the strategies of development and risk management at the level of financial intermediaries and the importance of standardizing sustainable practices throughout the entire banking system in Romania.

Expanded Audit Reports and Audit Fees – A Content Analysis on the Romanian Banking Sector

Nowadays, the communication between the auditors and both shareholders and stakeholders has a significant role in delivering value. Therefore, the new format of the audit reports that will be analysed in the following chapters, has not only the role to improve the dialogue between shareholders and directors, but also to provide the key to the audit „black box” in order to explain in details what is the work performed by an auditor, leading to an increase in the trust placed in an auditor by the shareholders. This study has two main objectives, the first one being represented by the identification and analysis of the components of an audit report, while the second one is represented by identifying and analysing the key audit matters. The third objective which is an adjacent one is represented by a comparative analysis of the audit fees by taking into account different indicators, such as profit before tax or total assets.

Expanded Audit Reports and Audit Fees – A Content Analysis on the Romanian Banking Sector

Expanded Audit Reports and Audit Fees – A Content Analysis on the Romanian Banking Sector

Banks Digitalization - A Challenge for the Romanian Banking Sector

Abstract The banking system has undergone several transformations since its beginning up to now, some as a result of adapting to customers’ requirements that have become increasingly sophisticated, and others as a result of the economic and political contexts that have passed, which again – have required its adaptation. Regardless of the situation, the banks have undergone a large digitization process, a process that is now in progress and which in the coming years can cause a significant change in the banking we knew about 10-15 years ago. Through this paper, I propose to analyse the situation of the banking system in terms of adapting to these challenges, at the level of Romania, in the context of the current situation at global and European level, in order to highlight both the progress achieved and the gap in comparison to the other countries, much more competitive from this perspective.

The relationship between internal market orientation and employee job satisfaction: the case of the Romanian banking sector

The paper aims to investigate the effect of internal market orientation and its dimensions on the employee job satisfaction. The idea of this research emerged from the extensive scientific literature that suggests the existence of a relationship between internal market orientation and employee job satisfaction. In fact, internal market orientation is conceptualized as a set of managerial behaviors that have the potential to influence employee behavior which would in turn affect customer satisfaction. The research involves a questionnaire-based survey of employees in the banking sector in Romania. The convenience sampling method was used. A total of 170 usable questionnaires were received from the employees. The measurement scales within the proposed model were evaluated for reliability and validity. The research hypotheses were tested via linear regression. The study’s empirical results suggest a positive influence of the internal market orientation and each of its three dimensions on employee job satisfaction. In order to increase the level of employee job satisfaction, the organization should systematically monitor the personal needs of every employee, to adapt every important decision taken by the managers to the individual needs that employees of different groups may have, supervisors should be interested in listening to what subordinates have to say about jobs, about the issues they have and the management of the organization must seriously consider employees’ needs, introduce policies and allocate funds to meet these needs.

Asymmetries in responses of commercial banks in a transitional economy to countercyclical monetary policy: The case of Romania

The empirical results of this study reveal the following interesting characteristics of the Romanian banking sector over the December 1993 through August 2017 period. First, the spread between the lending-Central Bank’s discount rates was stable and adjusted to its long-run threshold asymmetrically. Second, lending institutions respond faster to contractionary than expansionary countercyclical monetary policy actions. This empirical finding suggests that Romanian commercial banks exhibit predatory rate setting behavior, which is consistent with those of their counterparts in advanced and emerging economies. Third, lending institutions respond to countercyclical monetary policy and the Romanian Central Bank authority effectively utilizes monetary policy to manage the economy as evidenced by the short-run dynamic and long-run Granger-causality from the discount rate to the banks’ lending rate. With respect to the time lags of the Romanian monetary policy found within the banking sector, the empirical results suggest that it takes almost two years for the lending rate to adjust to a monetary policy action completely.

Romania: Financial Sector Assessment Program-Technical Note-Systemic Risk Analysis and Stress Testing the Financial Sector

This Technical Note discusses the results of systemic risk analysis and stress testing of Romania’s financial sector. Although the Romanian banking sector has a strong initial capital position, banks are affected significantly by the realization of the shocks captured by the scenarios. The stress test results indicate that an extreme but plausible adverse scenario would have a significant negative impact on the capital ratios of the banking system. Although the banking sector as a whole maintains capital ratios above the minimum regulatory requirements, several (smaller) banks prove vulnerable. The extreme adverse scenario reflects downside external risks as well as a domestic demand shock impacting private consumption and investment.

Credit Risk Versus Performance in the Romanian Banking System

Abstract The Romanian banking sector, predominantly governed by the capital of foreign banks, is, as well as other international banking sectors, under the sign of the necessary balance that should exist between risk and performance. This is a result of banks trying to take risks that they can control, given that they need to generate financial results that are satisfactory for all categories of bank creditors, namely shareholders, depositors and other lenders. In this paper, I wanted to analyze the risk situation assumed by the main banks in the system versus the performance gained in recent years. This article is part of a wider research, so I will refer only to the main risk assumed by a bank, namely the credit risk, I will highlight the evolution of the indicators of this risk, so that I can finally analyze their degree of correlation with indicators for measuring bank performance. The situation of other financial risks in banking activity will be addressed in other works.

MACRO VARIABLES IMPACT ON CREDIT RISK AND INFLUENCE IN BANKING CAPITAL AND JOB CUTS IN ROMANIA

The scope of the research paper is to capture the connection between the representative macro-economic variables, gross domestic product, gross salary income, exchange rate EUR/RON, active interest rate and unemployment rate, respectively the variables which quantify the credit risk, non-performing loans rate and credit risk rate. For the quantitative analysis we used the VAR econometric models, the study being completed with a qualitative analysis which observes the influence in the credit institutions capital and the available jobs in the financial-banking system. The results obtained showed a considerable influence of the exchange rate, gross salary income and interest rate on the credit risk rate, while the non-performing loans rate was mostly influenced by the interest rate and gross salary income. The qualitative analysis exposed that at global level the losses registered in the banking sector were about 1.2 trillion USD, while the new capital raised was about 1 trillion USD and almost 390 thousand job cuts. In the Romanian banking sector, the study illustrates cumulated losses of 13.3 billion lei, compensated by an increase in capital at about 21 billion lei and restructuring of about 15 thousand jobs. The results obtained have both practical applicability, but also in the economic policies, clearly exposing the effects of the credit risk through the deterioration of the macro-economic environment. The information presented through the empirical analysis can be used by the researches, supervision and regulatory authorities or by the credit institutions in stress testing, forecasts or resolution decisions.

THE STRUCTURAL EVOLUTION OF THE BANKING SYSTEM IN ROMANIA UNDER THE IMPACT OF FDI

Foreign banks represent important channels for the transfer of productive resources, managerial and organizational skills and experience accumulated on international level, which led to increased competition in the banking market in Romania, which contributed to some extent to the profitability of the Romanian banking sector. The purpose of the current attempt of research is the analysis of the structural evolution of the banking sector in Romania, under the impact of foreign direct investments (FDI). Analyzing the structural evolution of the Romanian banking sector, there can be observed that in 2015, FDI has influenced some important merger operations on a level with branches of foreign banks in Romania, and over 85% of the total capital of the banking system in our country belongs to credit institutions with foreign majority ownership and to their branches. Regarding the origin of the foreign capital of credit institutions, it originates from the member states of the European Union (EU). It is also worthy of note that in 2015, the top ten banks in the banking sector of Romania held 71.6% of the assets, while the remaining 26 banks held a share of only 28.4% of the market. Banca Comercială Română, BRD - Groupe Société Générale and Banca Transilvania are in 2015 the main banks in the Romanian banking system, with a major market share.

The profile of the internal auditor in the Romanian banking sector

Internal audit in the banking industry is one of the most debated topics nowadays. The paper’s objective is to examine the profile of the internal auditor in the banking industry of Romania. The research design is empirical in nature. The researchers use the development of job announcements for the position of internal auditor in the Romanian banking industry. The announcements are classified according to: language of the job announcement; geographical area of the employer; the internal auditor’s tasks; the internal auditor’s professional requirements; education and qualification; practical experience; personal attributes; age; salary etc. The results of the research consist in the current profile of an internal auditor in a Romanian bank. The research fills in an important gap in the Romanian academic literature, which lacks studies regarding the internal audit in the banking industry.

Romanian Commercial Banks’ Systemic Risk and Its Determinants: A CoVAR Approach

This paper aims to estimate the effects of contagion on the Romanian commercial banks during period 2008 – 2015, by using the CoVaR methodology. The motivation in choosing this topic is represented by the fact there is little research on systemic risk and contagion in the Romanian banking sector. The results of this paper highlight that the largest contribution to the daily losses of Romanian banking system is given by BCR, while the lowest contribution is given by BCC. Moreover, we analysed the impact of the main financial indicators on systemic risk contribution. Based on this, we saw that financial leverage, size, risk and market to book value have a significant impact on systemic risk contribution of commercial banks.