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July 3, 2022

Early re-payment penalty legislation changes to re-start credits

The change of legislation in the area of early loan re-payment penalties will lead to more competition among banks, to lower interest rates and meant to re-start lending process, Competition Council President Bogdan Chiritoiu stated yesterday. ‘The Competition Council endorses these proposed changes of the relevant legislation. Although the Romanian Banks’ Association shows reservations in the matter, I trust we will find understanding and all the actors involved will prove reasonable’, Chiritoiu said, according to Mediafax. The banks have until September to amend all credit agreements concluded with individual customers in order to adjust them to the new EU regulations in the field and won’t be able to charge early re-payment penalties on floating-interest loans. Such penalties are capped to 1 per cent in respect of other loans.

In an interview with the ‘Financiarul’ newspaper published Thursday, Bogdan Chiritoiu says the crisis gives a temporary framework for granting state aid. The European Union has devised a special state aid tool for the recession period. ‘In this particular area, we have given a scheme for Eximbank and one for de minimis state aid’, Chiritoiu said. The Competition chief is rather critical of Romanian banks, referring to the ‘First Home’ lending programme and not only. ‘It is neither fair nor efficient that banks should prosper on the account of the rest of the economy that is in recession. Plus we are in a vicious circle now: banks keep clear of risks by increasing credit costs, but, in this way, they are actually killing their own customers, hence the economic environment becomes even more uncertain and hazardous. The banking system’s major issue is not the scarcity of cash. Banks do have cash, but they cannot use it’, Chiritoiu claims. He added that banks prefer to lend money to the Government because it is a big and safe client. On the other hand, Chiritoiu finds banks to be ‘co-operating’.

In the next 12 months, the Competition Council will conduct an investigation into road construction for a more accurate knowledge of the existing situation in that important sector, CC President Bogdan Chiritoiu stated on Thursday.

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