WASHINGTON, December 19, 2022 — The World Bank Board of Directors today approved €406 million (US$ 403.2 million) in financing to Romania to help strengthen the financial sector and increase its resilience.
The loan, provided in the form of an Investment Project Financing (IPF) with a Deferred Drawdown Option, extends contingent financing to the Bank Deposit Guarantee Fund (FGDB), which manages the deposit guarantee fund and the resolution fund in Romania. The loan aims to boost depositor confidence, while enhancing the institutional framework of the financial safety net.
Furthermore, this loan provides a reliable source of emergency funding to the FGDB in case of bank failure or bank resolution in Romania, and helps maintain the country’s macroeconomic stability and preserve the financial assets of Romanians. A core principle of Deposit Insurance is to have credible backstop funding which this IPF aims to provide.
“The 2008 Global Financial Crisis showed us that when a bank is in crisis, it is most damaging to small firms and poor households,” said Anna Akhalkatsi, World Bank Country Manager for Romania and Hungary. “Taking steps to help ensure a strong deposit insurance mechanism is a wise investment for any country. Through this financing, the World Bank will support the FGDB in playing an effective role in mitigating negative impacts on Romanians by securing and providing access to their savings when they need them the most.”
The FGDB guarantees the deposits of households and enterprises up to EUR 100,000, which is the mandatory guarantee ceiling in all European Union Member States. Strengthening the financial capacity of FGDB through this contingent financing will ensure that these depositors receive such compensation within 7 days, in line with national legislation. Greater financial stability also translates into a lower burden on the state budget, which allows the Government of Romania to focus on the provision of public services to all citizens.
