Romania Ctrl Bk Gov: Foreign Debt Caused By Population Overborrowing, Not Banks

„The banks acted as intermediaries, and we could say they lured the clients in (…), but they weren’t the ones that borrowed money and plunged Romania into debt: the citizens were the ones who took loans,” Isarescu told a banking forum.

Isarescu said the bulk of the EUR22 billion foreign financing attracted by the commercial lenders was addressed to local loans.

„Romanian banks have foreign assets of EUR2 billion, while their domestic assets reach EUR50 billion. In other words, the banks did their job on the local market (…). Therefore, the banks in Romania are only to be blamed, to use a strong word, for EUR22 billion out of a EUR90 billion external debt,” he added.

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The central bank’s chief said two-thirds of the 310 billion lei (EUR1=RON4.3079) overall household and corporate private debt comes from local lenders, 9% from non-bank financial institutions and 24% from external banks.

Around 4.5 million Romanians borrowed money from banks over the past years, equal to half of the country’s workforce, Isarescu said.

Only about EUR19 billion of Romania’s external debt represents public debt, he said, mentioning that the level was „manageable.”

In fact, the country’s foreign currency reserves are more than enough to cover the debt, provided the reserves are no longer used to guarantee external credibility.