Deleveraging pressures will continue to affect some of the Central and Southeast European countries including Romania, Hungary and Slovenia, because of their foreign exchange imbalances, Moody's concludes in the 2015 Outlook – European Banks report published online on December 8. Banking systems with a high share of foreign currency lending, such as Romania and Hungary, might be more exposed to FX volatility, the rating agency explains. Reduced funding from parent banks since the financial crisis will exacerbate this.
Local currency lending is rising at a steeper rate in Romania than the stock of forex-denominated loans. However, the forex-denominated loans still account for 56.4% of the total non-government loans. The exchange rate has thus a significant impact on the country's banking system - particularly on the quality of the bank assets, since sudden weakening of the local currency would jeopardise creditors' ability to service their dues.
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