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October 28, 2021

Is the bank loans market recovering?

The interest rates for loans will continue to drop, President of the Romanian Banking Association (ARB) and Head of CEC Bank Radu Gratian Ghetea assured. He emphasized that the National Bank of Romania (BNR) lately has given signals concerning the lowering of interest rates and will probably continue to give such signals.
The lowering of interest rates will lead to the growth of the demand for loans, Mr. Ghetea underlined, adding: “People have the impression that we, the bankers, are very angry when interest rates drop. We are not, because when interest rates drop it means the demand is starting to grow, the interest rate for loans representing the main share in our revenues. Of course, we are also wining from commissions, but the main revenues come from the volume of loans. We have to think that this volume can be maintained at the current level or can be hiked either by hiking interest rates, which would be a disaster, or by hiking the volume of loans.”
Emphasizing that according to the statistics the real-estate activity is starting “to budge” – a fact that also points to a recovery in mortgage loans – Ghetea stated that interest rates will be lowered throughout the range of loans: “An important element in this whole discussion is the rush that is created in the mass-media when, during a stage, it is announced that the “First House” program is being extended or not. Everybody was greatly concerned, which means that people want, plan to have a house.”
The ARB President concluded that banks are not lowering their own margins in the composition of the interest rate too because they express the level of risk that the bank assumes, their level being set to drop when competition will grow in the banking system. The example given by the ARB President in this sense consisted of electronic transactions in the SEAP system, where the financing of mayoralties by banks is done with margins of under 1 per cent, local public authorities representing a low risk.

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