About the Romanian banking system

About 1 year ago, I was complaining that the romanian banking system is too simple. Far too simple: time deposits, credits, some FX trading for the clients and that's it. No, there is something more: commisions for everything. Except entering for free in the bank building, for all the rest you have to pay.

Romanian banks are not market makers in the equity markets, they sell no corporate bonds or even romanian bonds. And they do not sell any structured product: for example, a product saying that you earn 25% in the next year, if bet-fi touches 100k or you get 20% if bet-fi goes down to 5k. They just sell a couple of mutual funds, but without being too noisy about. There is no banker calling you to propose an ultimative investment. I do not even know if forward credit exists (I speak about retail, of course). For sure, there is no kind of investment banking. They just earn from almost dummy and 100 years old products.

Last weeks, I heard a comment that this situation exists because Isarescu didnt allow the banks to extend to these areas. It was a brilliant decision, maybe not his, maybe without strong reasoning behind, but it is damn good that our banks are so simple. No bank has to do write offs because they have depreciating assets on their sheets, no panic among the clients because their structure products have a 0 value or just because the romanian bond looses value.

S&P downgraded BCR because they are full of romanian bonds (not corporate bonds, just bonds issued by Romania). Sounds strange, but it is something behind: romanian bonds lost dramatically value in the last weeks on the international markets, they are sold depending on the maturity at 65% to 85% nominal value!! How would the retail market react if they would see this decrease in their accounts?? Their time deposits are not safer than the bonds issued by the state, but everybody feels safer because they do not see the depreciation (even if the risk exists and even raised significantly, they are not priced in because there is no market price for your time deposit). So nobody gets a panic attack and that makes the banking system much stronger!

Maybe this is the reason why countries like Hungary, considered years ahead of Romania regarding development, did not succeed to remain stable. Complexity brings hard to manage risks. I am so glad that we are so simple and basic! :)