The first effects of the central bank's decision to loosen crediting conditions at the beginning of March appeared last week. Alpha Bank is the first lender that will be free to adapt its loan conditions to customers' individual profiles and come up with mortgages that require no down payment and with boosted loan levels.
Alpha Bank was among the first to submit its new set of rules to the BNR at the beginning of March. As of last week, the bank dropped the standard down payment rate for housing and mortgage loans from 25 percent to 15 percent.
The new crediting rules say the rate can be reduced further depending on the value of the transaction and collaterals. It has also added to the general loan degree, which now stands at 65 percent for all types of loans. The former central bank rules set the debt rate at a maximum of 40 percent.
The new level of debt is acceptable for Alpha Bank clients with incomes above EUR 1,500 per family. All other clients need to keep their loans under the 55 percent rate of indebtedness.
The bank expects the new measures to have a big impact on its already-growing housing product, Alpha Housing. At the end of 2006, mortgages given by the bank went up 95 percent compared to the previous year.
Along with Alpha Bank, the second biggest lender on the market, BRD-SocGen, eagerly submitted its new set of rules to the BNR while other players are taking their time with it.
Market leader BCR presented BNR with its new crediting conditions last week. BCR head Nicolae Danila described the set of rules as one of the most complex in the local banking system. The earliest time when BCR might expect to get an answer from the central bank is a month from submission, which is mid-June.
Raiffeisen Bank submitted the new ground rules in mid-April and has yet to receive the BNR's green light.
The bank said it would introduce mortgages without down payment only in the case of big transactions or clients that have a long-standing relation with the bank.
“There will never be a question of having zero down payments for someone who wants to buy a car or a studio apartment,” said Raiffeisen Bank president Steven van Groningen.
“We are not focusing on increasing the debt level or decreasing the down payment. We are looking for a more customized approach to each client's risk profile,” said bank vice-president Razvan Munteanu, who is in charge of the retail division.
HVB-Banca pentru Locuinte (HVB BpL), a niche local bank that specializes in housing bauspar loans, will send the new norms to the central bank this month, said bank president Petre Tulin.
“We approximate that clients will solicit the first loans only as of July,” he said.
Tulin said the new set of rules followed standards set by European housing banks and offer clients more flexible loan conditions.
“By saving for a relatively long period, the client has a superior credit worthiness compared to a client that has no history. Statistics show that generally housing banks have very small levels of non-performing loans, somewhere under the average level in the banking system,” said Tulin.
Most of the banks that have presented BNR with their documents sought to decrease the down payment rate and boost indebtedness levels, sometimes to a point where the central bank thought risk-mitigation principles were dropped.
Volksbank, one of the fastest-growing players on the retail market, sent its set of crediting rules to the BNR in March. The central bank sent them back for improvements.
“We have not received the BNR's approval yet,” said bank president Gerard Schreiner at the end of last month. “We must change some aspects slightly. We may have been too aggressive; maybe we did not make ourselves clear enough,” he added. This was the second time that the bank had had to go back over the rules.
Volksbank redrafted a third set of crediting norms for the BNR last week and is currently awaiting its answer.
Some of the most frequent mistakes that the central bank identified were risk-related or connected to the low levels of subsistence expenditures mentioned by banks in their documents.