Banking financial intermediationrelative to the economy is low and declining. The depthofthe Romanian banking sector is lagging both in terms ofdeposit and loan penetration. Cross-cutting factors such aspoverty, rurality and informality form a set of constraintsthat still persist affecting both financial inclusion andintermediation. On the demand side, credit needs remainlimited due to low enterprise density, poor health ofenterprises, especially micro-enterprises, relatively highnumber of foreign owned firms, and increasing use of otherforms of financing. Furthermore, while economic growth had apositive spillover, this did not translate into acommensurate increase in corporate investment activity. Onthe supply side, banks have been adversely affected by highNon-Performing Loans (NPLs) and deleveraging pressures. Gapsin access to finance persist, especially for micro, smalland medium-sized enterprises (MSMEs), start-ups, and inrural areas. The emergence of banks with niche marketpositioning could reverse the disintermediation trend, butshould be aided by measures to improve the health,performance, and skills of enterprises. Macroprudentialmeasures to protect against excessive sovereign exposurescould also, at the margin, support financial intermediation.
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