Trends in Transition: Fintech Credit Effects on Romanian Bank Stability

This research aims to look into the link between fintech lending and bank stability. In order to establish how fintech lending influences the stability of banks in Romania, regression analysis was performed for the timeframe 2017-2020. In this sense, indicators pertaining to fintech lending, Z-scores, and liquidity were used in the research. The findings of the study underline that improvements in fintech lending impact in a negative way the bank's Z-score. Given the altered competition between organisations in Romania, bank stability might have been threatened by an increase in fintech lending. Due to the availableness of credits, fintech organisations have the possibility to gain customers from traditional banking entities. As a result, competition will face an improvement and banks will find it difficult to keep fulfilling essential banking benchmarks. Additionally, changes in the legislation governing the two financial systems may limit the capacity of authorities to conduct supervision and thus hinder their ability to detect potential dangers within the financial system. On the other hand, it is possible to talk about a positive correlation between bank Z-score and liquid assets to deposits. Depending on that result, an increase in the ratio of liquid assets to deposits may a positive effect on the bank Z-score.