ROMANIA: Economic Crisis to Hit Romania in 2009-2010

Banks call on BNR to change crediting regulations to unlock mortgage market.

Romania will be affected by an economic crisis starting from 2009, to last until early 2011, Dragos Cabat, Financial View managing partner, warned yesterday. He holds that private initiative would be the only chance for the regulation of the domestic and international market, Agerpres reports.

‘I believe in the coming years Romania will face an economic crisis to become visible in 2009 and extend into the first part of 2011. Of the three alternatives that might impact the global market, and therefore Romania, swift rebound, extended recession or depression, I believe we will deal with a combination of the last two,’ Cabat told the Romanian Banking Forum yesterday.

He also said that the loan market is blocked for now, and the only chance for economy to recover is a private market and not state-coordinated infrastructure investments.

Separately, commercial banks will call on the National Bank of Romania (BNR) to change the personal loan regulations, since the new terms have locked mortgage loans, the president of the Romanian Bankers Association (ARB), Radu Ghetea, said. ‘These modifications prove extremely harmful as to home loans. After the application of the stress test, of the new algorithm, very few customers still qualify,’ Ghetea said. ‘We believe that the indebtedness degree being lowered will lead to the unlocking of the mortgage market,’ Lucian Anghel, chief economist at the Romanian Commercial Bank (BCR), said, adding that the credit market will relax in the second half of next year.

On the other hand, the ARB president maintains that he sees the new regulations as beneficial for consumption credits.

The banking community believes there should also be taken fiscal measures among which VAT reduction or scrapping for some major activities, even in the field of home constructions.

Bankers: BNR should lower the mandatory minimum reserve and the key interest rate

Bankers believe BNR should continue reducing the mandatory minimum interest rate and begin revising down the monetary policy interest, Radu Gratian Ghetea also said. ‘Our proposal is for the money that continues to be blocked in reserves to be released so that we can use it for loans. The funds might be used to buy state bonds, for crediting Small and Medium-sized enterprises, agriculture and home construction,’ the ARB President holds, who considers that real estate activity needs to be re-launched, with the banking community coming with a several means by which banks can lend RON mortgage loans.

Vasilescu: There are banks that pay 10 pc for deposits and charge 35 pc interests on loans

The national Authority for Consumer protection should take note of the banks that pay 10 per cent interest for deposits yet upped loan interests up to 35 per cent, Mediafax reported Adrian Vasilescu (photo), adviser to the BNR Governor, to have said yesterday. ‘I wonder which market conditions have changed to have a margin of three and a half. BNR no longer goes hand in hand with ANPC, which should take charge and take measures. It will be quite complicated, since we need specialised structures,’ Vasilescu said, who acknowledged that the Central bank still receives many complaints from discontented customers, private individuals especially.

On the other hand, the BNR official also said Romanian banks, most of whom are held by credit institutions from European Union countries saw they no longer get resources from parent banks and are focusing much stronger on the domestic market, with savings becoming a priority.

Vasilescu called the rise to EUR 50,000 of bank deposit guarantees a happy decision which calmed down things in Romania, yet, the threshold should not be increased to EUR 100,000 as discussed in the EU.

The central bank is entitled to call the banks which unjustified rose interests, given a 3.5 times difference between the passive and active interest rate, since it is not right for banks to pass their mistakes on to their customers, the BNR governor’s adviser said, who added that BNR is nonetheless convinced commercial banks should be defended, as they are ‘a money store’ that needs to be supplied and credit is the banks’ principal capital.

BNR: Banking deposits to grow more quickly than credits

The banking deposits will grow more quickly than the credits in the next period, and the credits/deposits ratio will tend to be unitary compared to 1.3/1 now, declared the chief economist of BNR, Valentin Lazea. “There isn’t any liquidity crisis in the system, especially of RON. The foreign currency will be definitely less accessible, but it will not drain the flow of foreign currency. But the credits to deposits ratio must be balanced, both in RON and foreign currency,” Lazea said.

The BNR official said that the Romanian market is advancing to a state of normality, in which the central bank furnishes liquidities to the commercial banks, and when there was liquidity in excess the situation was abnormal.

On another hand, Liviu Voinea, Executive Manager of the Applied Economy Group (GEA), estimates that the fall of crediting in Romania will definitely conduct to a significant slowing down of the economic growth. Voinea explained that the most dynamic sectors of the Romanian economy – constructions and retail, which had the most important contribution to GDP’s growth, are by far the most indebted. He also added that the population will not have any longer the same growth of the revenues, of 20-25 per cent in the past few years, nor the same expectations in terms of growth of revenues, which will reduce the appetite for loans.

by Monica Apostol
Source: Nine o'Clock