THE IMPACT OF HOUSEHOLD SECTOR RISKS TO THE SOUNDNESS OF THE ROMANIAN BANKING SYSTEM

Abstract

The paper focuses, primarily, on assessing if risks associated to household sector havea significant impact on Romanian banking system’s soundness and stability, by establishing whichhousehold specific variables are the most important and have to be monitored. We have consideredseveral representative prudential and performance banking system’s indicators and we haveperformed a regression for each one, against a set of 12 explanatory variables, concerninghouseholds’ balance sheet, their net earnings, the dynamics of unemployment rate, the degree ofindebtedness, banking system’s exposure to currency risk associated to households. Our empiricalfindings suggest that banking system profitability, expressed as return on equity, and liquidityindicator are the most influenced by households’ financial behavior and the evolutions on the labormarket.banking system vulnerability, prudential indicators, households’ financial position, logisticregression