Romania’s financial sector has strengthened significantly over the last few years. Effective supervisory measures have helped reduce the high level of nonperforming loans (NPLs) from 21.9 percent at its peak in 2013 to 6.4 percent as of December 2017. Foreign-owned banks’ dependence on parent funding has significantly declined, while deposits from the domestic private sector have increased, reducing liquidity risks. Banks’ capital buffers strengthened, on the back of a slowdown of credit and low interest rates, with an average capital to risk-weighted assets now above 18 percent. Substantial progress made since the last FSAP is summarized in Appendix I.

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