The banks will take into consideration December 31 as the date for determining the credit risk provisions for 2007, although the last banking day of the year is December 28. "The financial year is the period for which yearly financial statements need to be drawn up, and which usually coincides with the calendar year. (...) Modifying the time when the provisions are determined would have direct consequences on the results of the financial year, such a solution cannot be accepted because it is an infringement upon the law," explains first vicegovernor of the NBR (National Bank of Romania), Florin Georgescu, in a letter sent to the bankers. The credit risk provisions are funds that the banks have to set aside in order to cover potential losses caused by clients not paying back credit instalments. These provisions hurt profitability, as they are not fiscally deductible, so it is in the bankers' interest to maintain provisions at as low as possible levels. Banks have to establish provisions for credits granted depending on the financial statements of the borrower, and on the debt service (the number of days by which the payment is delayed, if such delays occur).
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