IFC, the World Bank's private investment arm, is planning tohelp banks process non-performing loans, as it is able to getinvolved through stakes of as much as 20% in private equity fundsthat are set to focus on this activity, should institutionsconsider they need such support, says Ana-Maria Mihaescu, head ofIFC mission in Romania.
This is one of the clearest messages so far coming from ahigh-ranking official of an international financial institution,calling on banks to bring out non-performing loans from theirbalance sheets and outsource them. IFC has an exposure of around600m euros in Romania, 70% of which to the banking system.
"Our experience from other crises shows the level ofnon-performing loans generally rises from what we currently have onthe Romanian market. We're also considering introducing someproducts or projects meant to help banks process NPLs(non-performing loans i.e.) on the market, the more so as there isa quite high percentage of so-called distressed assets at present,either admitted or about to be admitted in the financial sector,"she specified in an interview with ZF.
Bankers are faced with a growing portfolio of non-performingloans, which is pushing up risk provision expenses. In a bid toadjust portfolios, some banks have started selling these loans tofirms specialising in debt collection.
She explained non-performing asset processing required highexpertise and a combination of international experience withdomestic one, and that there were already funds seeking capital forsuch operations. "We will probably come with stakes in funds set toparticularly focus on taking over non-performing assets andprocessing them. We are in talks with banks to see whether theyneed help for the takeover and processing of these assets and todetermine how great their need to resort to these funds is, so aswe may be able to decide the necessary capital from IFC for it tohave a significant participation in this process".
Mihaescu said she did not believe IFC would need to have aninvolvement of beyond 20% for Romania.
As a matter of fact, some banks have already created their ownnon-performing loan processing units. "We have to see if it's moreattractive for banks to create some strong departments or if theyshould identify those portfolios and sell them," Mihaescu says.
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