Credit Risk - the Primary Decision Factor for Credit Institutions in Romania

Credit risk -- known as counter-party or client insolvability risk -- is the most important risk which the bank is facing. It consists of the probability of losing from the client's non-observance of the clauses stipulated by the contract. The lost may be total or partial. The administration of the banking activity of crediting implies the identification and analysis of risks and influence factors as well as a statistic study of measuring the risks which affect the lending banking activity. Although, credit risk has become the major preoccupation for Romanian banks, as the recession led to a higher number of insolvencies and bankruptcy amongst the local companies. Still Romania seems to have the best coverment grade with provisions for the non-performing loans, of 98%, under the circumstances of which in most countries it is situated under the level of 75%. Banks anticipate the continuous deterioration of the credit portfolio's quality and the increase of the provisions for the non-performing loans, thing that might transform into real loses for the creditors.