Lending Convergence in the Romanian Banking Sector

AbstractLending convergence is to be expected in developed banking sectors but has the potential to enhance cyclicality. We study lending variations in Romania from 2007 to 2013 and find that the onset of the financial crisis was accompanied by lending stagnation and an increase in banking convergence. We argue that lending variations depend on sectorial developments, which in turn depend on economic growth. Results from econometrical convergence models confirm a sudden increase in banking convergence during the financial crisis, followed by a relative moderation after 2012. Lending convergence is important for macroeconomic policy makers, while also allowing for macro prudential adjustments