CONTEXT:

• The economy has begun to feel the price of reforms postponed for years. Entrepreneurs, company managers and financial institutions are preparing for the impact of the measures with which the state is trying to correct its deficits and are already seeing their activity and business plans affected.
• Regardless of the challenges of this period, financing economic prosperity is still expected from the banking system, the capital market and the insurance sector.
• However, the growth of financial intermediation, as a solution for economic development, is increasingly difficult to sustain, although the health of the financial system is now much stronger than in other periods in the past. Banks have consolidated their balance sheets, with results that allow them to support financing in the real economy. The stock market has also improved its liquidity, and the insurance market has overcome difficult times and is seeking to re-establish itself on sound foundations.
• Lending faces growth challenges both in the population segment, where the persistence of high inflation has put pressure on disposable incomes, and especially in that of companies. The latter already had a diminished capacity to borrow (a third of the companies in the country have negative capital), and recent developments in the economy are putting them under additional pressure.
• The uncertainties in the business environment are also reflected in the weakening of companies’ financial discipline. Their arrears are increasing both towards suppliers and other non-banking partners (annual advance of over 22%), as well as towards the state and banks. The non-performance rate on corporate loans increased to 4.4% in the spring of this year, and the problem of late payments is also starting to affect state-guaranteed programs (IMM Invest).
• The new fiscal measures are further dampening the growth of lending. The increase in VAT, both at the general rate and for housing, may influence the evolution of financing, adding to pressures from other directions: inflation, pressure on the country rating, interest rates, weakening confidence of companies and the population.
• Banks are, in turn, directly affected by the fiscal measures adopted to reduce the budget deficit. The doubling of the turnover tax to 4% and its maintenance at 2% for banks with market shares below 0.2% have reduced the capitalization space in the system, threatening to slow down lending in the medium term. Banks are affected differently, in some cases to a problematic extent for solvency and liquidity indicators.
• After several years of very good results, the banking system is starting to see its profitability diminish, according to data from mid-year.
• The state also faces major financing challenges. To cover the huge deficits of the public budget, Finance relies on the domestic banking system.
• The cost of financing matters, and decisions regarding interest rates are measured with caution by central banks, as they must balance, in a fragile balance, the need to reduce inflation and reduce the risk of a recession.
• The capital market, the insurance market, and pension funds may all be affected by fiscal measures if their development prospects are undermined again.
• Beyond the uncertainties of this period, solutions for economic recovery and growth, in a difficult environment, can only work by involving the financial markets, regardless of whether they are measures in the area of ​​government support programs or private sector initiatives.
• In the last hundred meters, although Romania has once again ticked off delays and losses of funds, hopes for future economic growth are still placed in European financing, where the involvement of the banking system is essential.
• In such a complicated period, which is not lacking in geopolitical tensions or the approach of wars, managers of financial institutions are looking for solutions not only to adapt to the difficult economic, social and political context, but especially to reinvent and innovate in a world undergoing rapid technological change. Technological challenges, the advance of artificial intelligence and the need to keep up with innovations in the field are the major concerns in the banking, capital and insurance markets.

Profit.ro Financial Forum – Financial Market Leaders in Dialogue

For a consistent debate on the developments and prospects of financing the economy, Profit.ro aims to bring together leaders of financial markets and authorities in the field: from the leadership of the Central Bank, the Government, the Ministry of Finance, the Financial Supervisory Authority, top managers from commercial banks, capital market companies, insurance companies and fund managers, in the eighth edition of the Financial Forum.

Profit.ro Financial Forum will be structured in three sessions:

• the first, dedicated to the banking market, the main financier of the Romanian economy;
• the second, focused on the stock market, investment funds and private pensions;
• the third, focused on the insurance market – all of these sectors contributing to the complexity of the financing challenges in the current economic context.

DISCUSSION TOPICS:

Panel 1 – Challenges for bank financing

• Impact of new fiscal measures in the banking system.
• The banking market perspective on budgetary and macroeconomic uncertainties.
• Evolution of banking indicators. Growth prospects for lending and saving. Implications of interest rate developments.
• What impact does the increasingly broad transfer of state functions have (tax collection, KyC, seizures. Combating money laundering, etc.).
• Challenges for compliance risk.
• Changes in risk assessment. Increase in non-performing loans.
• Consolidation in the banking system. Prospects for large and small banks after a recent wave of mergers and acquisitions.
• Impact of legislative changes targeting the banking system.
• Technological transformations in the banking system.
• How the relationship between customers and banks has changed.
• The outlook for government guarantee programs, which support a large part of bank loans. What is going well and what improvements are needed.
• Support for entrepreneurship by banks.
• How banking networks continue to transform and the digitalization of services.
• The banking products of the future, innovations that change the market.
• The outlook for bank profitability, after a period of exceptional results.
• The outlook for the monetary policy and supervision of the central bank.
• Financing large infrastructure and strategic projects.
• Challenges for state financing, in the era of huge deficits.
• Cybersecurity challenges.

Panel 2 – Challenges for the stock market, funds and private pensions

• Evolutions and prospects for the stock market.
• How do international tensions affect the Romanian capital market? What domestic measures can mitigate the problems?
• Challenges for stock market liquidity. New listings. Obstacles and solutions. New measures needed to further unfreeze the primary offering market.
• The impact of the new fiscal measures on the markets. How will the new fiscal regime influence the attractiveness of the market and how can the base of individual investors be broadened? How can individual investors be convinced to come to the capital market, in order to have access to better returns, in a context in which interest rates are also increasing in the banking market?
• How did the stock market capitalize on the opportunities that arose after gaining emerging market status?
• The effects of fiscal measures on the private pension market. Is the current contribution deductibility threshold, unchanged since 2009, still sufficient to support market development?
• Challenges for private pension fund investments in volatile markets.
• Transformations in investment policy and necessary changes in pension fund legislation.
• How can investment funds empower the available resources of Romanians in this difficult period?
• Legislative challenges in capital markets.
• Overcoming bottlenecks in the bond market.
• Challenges for government securities and bond portfolios in the context of increasing deficits.
• What will the derivatives market look like and what liquidity can we rely on in the coming years?
• Improving financial education – one of the priorities of financial markets.

Panel 3 – Challenges for the insurance market

• What impact does the crisis have on the activity of insurers? Which policies are customers turning to?
• Prospects for health insurance, in the context of changing customer behavior after the health crisis.
• What is changing in the regulation in the field.
• Solutions so that the market is no longer overwhelmingly dominated by mandatory insurance. Life and health protection (voluntary) vs. property protection (imposed by law).
• Challenges for the RCA market: How can it become profitable again? The effect of frequent legislative changes. Where do the parties that sometimes unfortunately come into conflict meet: insurers – service providers – customers.
• How will the digitalization of insurers continue after the pandemic-forced measures?
• What will be the impact of the slowdown in credit demand on insurers?
• What financial literacy gaps need to be addressed in the insurance sector.

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