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April 16, 2021

Austerity measures lead to 2nd loan restructuring wave

Banking system is prepared to cope with it, bankers claim.

Bankers expect a second wave of loan restructuring following announced austerity measures in the public sector and claim the banking system is prepared for it.

‘There are borrowers who began having repayment difficulties in Q4 of 2008, for two reasons. One was the crisis and the second one that some of the people could no longer pay. But what will happen with the borrowers working in the public sector and whose pay will be cut? Will they still be able to pay? I don’t think so. Do we need to restructure 30 per cent of our credit portfolio? Loans to customers working in the public sector account for about 30 per cent of our total lending portfolio. It all means we will be having extra costs while getting the same revenue,’ Piraeus Bank Romania CEO Catalin Parvu said at a Finmedia event yesterday, according to Mediafax. He noted a second reason of loan repayment difficulties had been the over-indebtedness. Parvu expects retail banking segment to become stagnant or to take a slightly decreasing trend because of the high indebtedness rate, cut income, declining confidence in contracting personal loans and uncertainties regarding property prices.

‘We expect to have a second wave of loan restructuring following the recent austerity plan. The banking system is prepared to cope with it. We expect 25-30 per cent of bank customers to be affected by these pay cuts,’ Alpha Bank Romania President Sergiu Oprescu in turn said. He pointed out that loan restructuring options are currently more advanced than they were in 2009 and that, this time, the affected borrowers will not be jobless people, but people simply making less money, which is a much easier situation from a bank’s point of view. ‘People are scared by banks and do not realise they can talk to them,’ said National Consumer Protection Authority (ANPC) Director Mihai Meiu. He added that loans should be granted in a more responsible way than they had been in the past.

Central bank data shows one fifth of all retail loans were awarded to public service workers, accounting for approximately RON 20 bln (EUR 4.8 bln). Banking industry sources told Mediafax that BNR gathered data suggests quite a notable dispersion, with some banks having 10 per cent share and with other having 25 per cent share of loans given to borrowers working in the public sector.

Simplification of banking products, new trend

Banks are expected to start simplifying banking products in order for customers to understand what they are buying, the president of Alpha Bank Romania also stated. In that way, customers will understand exactly what they are buying when they enter into a relationship with the bank. On the other hand, according to him, the banks will want to gather more solid customers who have maintained good relations with their banks over time. The Alpha Bank head also explained that the Romanian system too would adjust itself and would place the customer in the centre of its operations, trend that was already becoming noticeable. Piraeus Bank CEO Catalin Parvu in turn mentioned that the banks had opened a lot of branches on the last years, pushing for direct relations with the customers. Parvu is of the opinion that, having expanded physical networks, the banks will now need to invest in technology more, recognizing the reality that more and more people are using the internet and that the younger generation will want to be able to deal with banking matters in the shortest time possible.

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