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April 12, 2021

Hard currency credit restriction, a ‘predictable necessary evil’

The Central Bank is going to change the rules of the crediting ‘game’, trying to make banks become more cautious and encourage them to lend more RON credits, experts say.

The National Bank of Romania (BNR) Tuesday evening posted on its Internet website the draft Regulation on personal loans, so that banks have to test the “worst case scenario”.

Banks will make simulations based on value indexes set up under the regulation. The following elements will be taken into account when establishing debt ceilings: exchange rate shock – RON/EUR – 35.5 pc; RON/SF – 52.6 pc; RON/USD – 40.9 pc; interest rate shock – 0.6 pc for all currencies; earning shock – 6 pc. The RON/SF rate is used the value corresponding to the Swiss Franc (SF) for the other currencies.

HotNews cited BNR sources as saying similar projects are not expected to be run for companies. The Central Bank has tried to restrict hard currency crediting before, and, contrary to the opinions expressed by people familiar with the issuing bank, it had failed. Radu Ghetea, head of the Romanian Banks Association (ARB) and CEO CEC Bank, yesterday said that, before the project was published by the BNR, it had also been discussed with ARB officials, yet not punctually. “Over the past year, there have been talks between us and the BNR, some of which were principled, others, punctual. What has been published has been related to prudence rather than administrative restriction of hard currency credits,” he also said. Nicolaie Chidesciuc, Chief Economist ING Bank, is of the view credit restricting measures are required, along with measures aimed at boosting RON loans, yet the restricting moment is untimely, given the slow crediting dynamics so far. Also, an official with the top commercial bank said that, while until now, banks required down payments on consumption credits, with the down payment amount varying from bank to bank, henceforth, down payments become “universal” with all banks being on equal footing. “Some banks are likely to come up with proposals to those directives,” he outlined.

There’s no such thing as a decision without costs, Prof. Daniel Daianu says

In an interview to ziare.com, Prof. Daniel Daianu, former finance minister, expressed the view the credit cannot be killed. Referring to the moment the BNR chose to take this step, Daianu holds the view there are several reasons justifying the BNR’s stand, yet there’s no such thing as decision without costs and even though these measures appear to be restrictions they nonetheless need to be taken in some crediting areas. “If, crediting appears being restricted, it is also similarly true that boosting hard currency credits or perpetuating it in the current form puts the national economy at risk,” the former minister also said.

133 pc collateral on consumption credit and minimum 30 pc down payment on eur real estate loans

According to proposals published by the central bank, and also applicable to foreign bank subsidiaries, under debate by Sept. 20, consumption loans will not be beyond five years, and collaterals must match 133 pc of its value. A debt ceiling of 10 pc is proposed for debtors unprotected by the hard currency risk. Also, some financing caps are likely to be imposed related to the collateral value, differentiated according to currencies, for real estate loans, 85 pc, RON, 70 pc, euro, and other currencies, 60 pc.

A similar regime applies to refinance home loans. To take out a real estate loan, loan buyers must put a down payment of at least 15 pc of the real estate property value for RON loans, 30 pc, euro loans, and 40 pc, other foreign currencies.

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