Loading ...Foreign currency loans will see a strong setback and we will witness a migration towards financing in local lei, governor of the National Bank of Romania (BNR) Mugur Isarescu on November 3 told the conference organized for the presentation of the quarterly report on inflation.
“We see that the foreign currency credit has tempered. Not because this would be a great success of ours, we have been struggling for three years now and cannot say that we won. But the international events came rolling in and put a break on foreign currency lending and will further dampen it,” said Isarescu, cited by daily Ziarul financiar.
The BNR governor said that an adjustment process is on going, followed by the migration from credits in foreign currency towards loans in the national currency. Isarescu voiced confidence that banks will not halt lending, because this would practically mean going out of business.
Isarescu expects foreign currency lending to undergo a strong brake as the banks no longer benefit from the shareholders’ support, like in the previous years.
Isarescu expects foreign currency lending to undergo a strong brake as the banks no longer benefit from the shareholders’ support, like in the previous years.
Some foreign banks might even reduce their exposure on the local market, so that they will no longer renew the credit lines to local branches after their becoming due. BNR officials however exclude the scenario of abrupt capital withdrawals from the banking sector.
Isarescu added that by cutting down the banks’ minimum mandatory reserves in local lei, BNR sough to encourage lending in national currency to offset the shrinking financing in foreign currency.
Isarescu added that by cutting down the banks’ minimum mandatory reserves in local lei, BNR sough to encourage lending in national currency to offset the shrinking financing in foreign currency.
Under these circumstances, he said that the minimum mandatory reserves banks are required to place with BNR might be further slashed.
“Both credit lines and deposits of non-residents local banks have preponderantly used to get financing from are on the long term. None carries early repayment clauses,” said Cristian Popa, BNR vice-governor responsible for monetary policy coordination. Thus, more than half of the credit lines and 80% of deposits have maturities longer than two years.
“Both credit lines and deposits of non-residents local banks have preponderantly used to get financing from are on the long term. None carries early repayment clauses,” said Cristian Popa, BNR vice-governor responsible for monetary policy coordination. Thus, more than half of the credit lines and 80% of deposits have maturities longer than two years.
Vice-governor Popa anticipates a slowdown in investment credits and retail lending that will be most visible for foreign currency loans.
Governor Mugur Isarescu also referred to the rising competition among the banks in attracting funds from the clients. In this context, Popa said that the banks’ decisions on the interest rates paid for deposits will depend on the chosen strategy: either to seek financing on foreign markets, or locally pool resources.
The banks that rushed to lure clients with ID-only credits disbursed under the meanwhile expired, more lax conditions, now announce their clients that they have put up interest rates for loans by three or even 5%, added the BNR governor.
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