Romania cbank official says lenders making big extra loan provisions didn't follow rules

BUCHAREST, July 8 Tue Jul 8, 2014 5:40am EDT

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BUCHAREST, July 8 (Reuters) - Banks in Romania that are now making large additional provisions are doing so because they did not follow the rules earlier as they should have, a senior central bank official was quoted on Tuesday as saying.

Austrian bank Erste, emerging Europe's third-biggest lender, said on Thursday it could post a record net loss of up to 1.6 billion euros this year due to higher provisions for soured loans in Romania and a law cutting bank charges in Hungary.

Erste said its problems in Romania stemmed from the central bank clamping down on non-performing loans ahead of a European Central Bank review of large European banks later this year.

The Romanian central bank initially declined to comment, but the head of its supervisory department, Nicolae Cinteza, told daily Ziarul Financiar in comments published on Tuesday that was not the case.

"We have not forced anyone to make additional provisions," Cinteza was quoted as saying.

If banks now needed to make large provisions for non-performing loans then it meant they had not made them on time.

"We haven't changed anything about the provisioning methodology. Additional provisions are necessary only for those who did not make provisions according to IFRS (international financial reporting standards) requirements. Those who respected the standards ... have no reason to make provisions now," he said.

Cinteza said the central bank did send letters to banks recommending that they make appropriate provisions.

"We only sent banks recommendations through letters. The decision to clean up belongs 100 percent to the banks. Whether it is good or not we will verify at the end, but we haven't changed any regulations," he said.

"If anything, we may have been too lenient given that we have been talking about acknowledging non-performance for three years," he said.

Erste, which owns BCR, Romania's biggest lender, said in addition to increased provisions, the group would carry out an impairment test on the entire amount of its Romanian intangibles of about 800 million euros, which may result in their full write-off. (Reporting by Luiza Ilie; Editing by Susan Fenton)

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