Iancu Guda, AAFBR: IRCC will be equal to ROBOR in one or two years

Loan installments paid by Romanians should fall by 5-10 percent between May and June by applying the new Consumer Credit Reference Index (IRCC) instead of old ROBOR and by 2-3 percent in July, but over one year or two the IRCC will be comparable to ROBOR, said Iancu Guda, president of the Association of Banking and Financial Analysts of Romania (AAFBR) to Agerpres.

“Based on the IV quarter, 2018, calculations, the IRCC index is 2.36 percent, while ROBOR at three months was 3.2 percent, which means that Romanians’ monthly installments in the second-quarter have decreased by 5 to 10 percent, but since April is already gone, the calculus it is only for May and June. It depends on when you get the credit. If the credit was taken recently, the monthly installment will drop by 10 percent. But in the third quarter, starting July, August, September, the IRCC is 2.63 percent, so the installments are down by 2 to 3 percent. We will not see in any case decreases at the level the government said, “by half”, decreases that are technically or economically impossible. On the contrary we will have quarters when the IRCC will be over ROBOR. That is why I think on a horizon of 1-2 years, the IRCC will be comparable to ROBOR,” said Guda.

Regarding the types of loans to which the new index will apply, he noted that it would be risky to introduce the index in the First Home (Prina Casa) due to its volatility compared to ROBOR.

“Aside from the current government’s statements and current legislation, the new IRCC index applies only to new and refinanced loans. The First Home program is governed by a special law because it is a special project as it attracts obligations and guarantees from the state that reached even a record level. We are talking about RON 40 billion the total of the loans granted since July 2009 when the program has entered into force. You imagine that if it went into default- the banks would actually execute state guarantees and would become public debt. We are talking about a program that has enormous state obligations and such a financing product cannot be changed overnight by an emergency ordinance or by some statements as the new index is very volatile and can lead to the explosion of the arrears non-performing when the economy is hit by the recession,” said Guda.

On May 2, the Ministry of Finance announced that the rule to include in the calculation formula the interest rate of the benchmark calculated quarterly solely on interbank transactions also applies to government-guaranteed government programs, namely First Home, First Car and “Invest In You.”

On May 2, the National Bank of Romania published the quarterly benchmark for consumer credit (IRCC), governed by Articles II and III of the Government Emergency Ordinance no. 19/2019, which is 2.36 percent per year. The index was calculated as the arithmetic average of the daily interest rates on interbank transactions in the fourth quarter of 2018.