Lower credit. Bank lending in Romania registers first decline following emergency decree 114

The bank lending in Romania dropped in February for the first time in 14 months as the emergency decree 114 seems to influence the borrowing activity in the market.  

Compared to January, the bank loans granted to individuals and corporate clients in Romania declined by 0.1 percent in February – the first drop since December 2017 -, to RON 251.95 billion (EUR 53 billion), central bank data show.

However, households continue to borrow money from banks while companies show lower interest in taking loans.

Bank loans in RON granted to individuals rose by 0.6 percent month-on-month and by 18.5 percent year-on-year in February, up to a fresh all-time high of RON 96.5 billion (EUR 20.3 billion) despite higher interest rates.

But companies reduced their borrowings in February – for the second month in a row – as the RON corporate credit granted by the local banks declined by 0.1 percent month-on-month to RON 68.9 billion.

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During the last year (February 2018- February 2019), forex-denominated loans remained flat at RON 86.5 billion-forex equivalent but declined if calculated in EUR due to the steep depreciation of the Romanian currency in January – by close to 2 percent.

The amount of deposits increased by 9.1 percent year-on-year in February, to RON 333.3 billion (EUR 70.2 billion).

In January, the Romanians have reacted to the RON depreciation by moving savings from RON accounts into hard currency accounts ant the trend accelerated in February.

Bank deposits in RON have become less attractive this year as a consequence of low interest rates and currency depreciation.

However, following a decline in January, RON-denominated deposits of residents (individual clients and companies) rose by 0.4 percent month-on-month to RON 219.9 billion but the annual growth rate slowed to 5.7 percent, from 6.2 percent in January, 6.8 percent in December or even 8.5 percent in July, central bank data show.

Forex-denominated deposits rose by 0.9 percent month-on-month in February to RON 113.4 billion-forex equivalent, and by 16.3 percent year-on-year.

During the last couple of years, Romania’s bank clients increased their creditor status against banks due to strong savings and weak credit market, deposit holders being technically the banks’ creditors.

In February, bank deposits exceeded loans by 32 percent.

Almost 4 out of 10 Romanians (39 percent) have no savings and are forced to cut spending or borrow money from friends or family, an ING international study recently showed.

In Europe, more than one in four (27 percent) people say their household has no funds put aside. The shares are similar in Australia and the USA.