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Impact of COVID-19 Crisis on Banking Sector in Romania

Dumitru Ionut (), Bogdan Dumitrescu (), Cepoi Cosmin Octavian (), Pop Ionut Daniel (), Barnea Dinu (), Kubinschi Matei-Nicolae and Tatarici Luminita ()
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Dumitru Ionut: Bucharest University of Economic Studies
Cepoi Cosmin Octavian: Bucharest University of Economic Studies
Pop Ionut Daniel: Bucharest University of Economic Studies
Barnea Dinu: Bucharest University of Economic Studies
Kubinschi Matei-Nicolae: Bucharest University of Economic Studies
Tatarici Luminita: Bucharest University of Economic Studies

A chapter in Economic Recovery After COVID-19, 2021, pp 125-155 from Springer

Abstract: Abstract Postponing debt payment in the context of a lockdown of the economy in Romania during COVID-19 pandemic was a logical and beneficial step for all stakeholders. The analysis performed concludes that the solutions proposed both by GEO no. 37/2020 and the Law approving it are not likely to significantly affect the liquidity position of commercial banks in Romania, as they are able to absorb the shock. Also, the macroeconomic shock of COVID-19 may lead to a significant increase in the volume of non-performing loans, with subsequent negative effects on the banking sector's ability to lend to the real economy. In the context of the COVID-19 pandemic, the reduced-form stress testing exercise indicates a potential increase in the non-performing loans (NPL) rate in Romania, up to a level of approximately 12% in the adverse scenario, over a 2-year horizon. The simulations performed indicate that the banking sector can make a substantial contribution to limiting the economic contraction of 2020 and 2021 and thus to reducing business cycle volatility.

Keywords: Debt Moratorium; COVID-19 pandemic; NPLs; Structural VAR; ARDL models (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1007/978-3-030-86641-9_7

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