THE FOREIGN CAPITAL ROLE IN THE ROMANIAN BANKING SYSTEM - A GENERAL VIEW

Central and Eastern Europe represented in the 90s a preferated location for the foreign capital in many areas and, especially, in the banking sector area. The main investements in the banking sectors came as a result of privatisation of the state-owned banks in this region. After that, the bulk of bank financing going into Eastern European countries was loan financing from parent banks to their subsidiaries for an aggressive credit expansion, frequently in foreign currency. The resource flow may have also been triggered by profit opportunities in the region's version of the carry trade, and doing so through the extension of loans-in lieu of equity flows-had accounting and tax advantages. In sum, the resource flow reflects a strategic opening by Western European banks into new markets that were underdeveloped and that turned out to be quite profitable.