The credit outlook for rated Romanian banks remains stable, reflecting good prospects for growth in an under-banked economy but also a rising credit risk profile, says Moody’s Investors Service in its new Banking System Outlook for Romania. «The bank financial strength ratings (BFSRs) of Romanian banks reflect the country’s improving operating environment, with the on-going political and economic alignment with the European Union and good economic performance supporting the growth of the banking sector. The active involvement of foreign banks in the Romanian market has also raised the level of expertise in the system, contributing to the banks’ franchise development and strengthening the sector in terms of technological expertise, product support, transfer of banking know-how, and in helping with capital and funding needs,» says Constantia Constantinou, a Moody’s Associate Analyst and co-author of the report. Overall, the rated Romanian banks display good asset quality, adequate profitability, a relatively high capital adequacy ratio and good liquidity. However, the sustainability of these ratios is being pressurized. «Asset quality indicators may deteriorate as the portfolio matures or the operating environment weakens, while mismatches in the maturity profile of assets/liabilities indicate the banks’ need to diversify and lengthen their funding bases,» notes Constantinos Pittalis, a Moody’s Vice President, Senior Analyst and report co-author.