The Impact of Competition and Risk Exposure on Profitability of the Romanian Banking System During the COVID-19 Pandemic
Vasile Dinu, Mariana Bunea
Keywords:
ROA (return on assets), competition, banking risks, COVID 19 pandemic, Romanian banking
system
Abstract:
In the context of the economic uncertainty generated at the national level and caused not only
by the COVID-19 pandemic, for a healthy evolution of business relations in the competitive
environment, for resilience and survival in this context of the pandemic and efforts to counteract
possible financial losses, optimal risk management plays a key role in the banking system to
avoid excessive exposure with a negative impact on financial performance. The present research
aimed to provide an analysis of the potential relationship between the competition presented on
the example of the Romanian banking market (before the onset of the COVID-19 pandemic
and after its start), risk management in terms of risk-weighted assets (credit risk, market risk
and operational risk), on one hand, and the profitability of the banking system measured by
the ROA (return on assets) indicator, on the other. In order to test the formulated hypotheses,
the authors used a predominantly quantitative research methodology based on a statistically
deductive analysis with a series of testing objectives and potential cause-effect links. The results
of this study indicate, before the onset of the COVID-19 pandemic, the existence of a significant
intensity correlation between the banks’ exposure to the total risk (RWA) (risk-weighted assets)
and the market share (as dependent variables) and the banking performance indicator (ROA) (as
an independent variable) and, after the onset of the COVID 19 pandemic, banks’ exposure to the
credit risk, together with the position on the banking market.
Fulltext download:
 The Impact of Competition and Risk Exposure on Profitability of the Romanian Banking System During the COVID-19 Pandemic [PDF file] [Filesize: 1.41 MB]
 10.7441/joc.2022.02.01
Dinu, V., & Bunea, M. (2022). The Impact of Competition and Risk Exposure on Profitability of the
Romanian Banking System During the COVID-19 Pandemic. Journal of Competitiveness, 14(2), 5–22. https://doi.org/10.7441/joc.2022.02.01
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