Romanian Central Banks seeks to tighten regulation on retail lending

Newsroom 07/09/2011 | 13:53

The National Romanian Bank is planning to supplement the regulation concerning the share of retail and corporate loans in foreign currency, through a draft regulation package that is under public debate until September 20. This will also impact the consumer loans in foreign currencies that are not protected from the currency exchange risks. The central bank wants to decrease the volume of loans in foreign currencies contracted by customers operating with the local Romanian currency (RON).

The supplementing provisions will apply for subsidiaries of EU Members credit institutions that are present in Romania. The central bank states that a loan for housing investments needs to be guaranteed by a mortgage, with the sole purposes of acquiring or maintaining ownership on a land and/or building, or for extension or modernization works for a building. The consumer loans will be treated differently from the housing loans.

Customers seeking a consumer loan will have to deliver real or personal guarantees totaling 133 percent of the loans value with an initial loan maturity of maximum 5 years, decreasing substantially from the current maximum rate of 20 years. These provisions do not apply for medical or study loans.

For housing loans, the debtor will initially hold an advance of 15 percent of the house value for financing in the local currency (RON), which increases to 30 percent for loans in Euros and to 40 percent for financing in other foreign currencies.

The maximum level of indebtedness will also consider the following values: the exchange rate shock: 35.5 percent for EUR, 52.6 percent for CHF and 40.9 percent for USD; the 0.6 percent shock on all currencies for interest rates and 6 percent for the revenue shock.

Ovidiu Posirca

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