Private Lending In Romania Grows At Risky Pace – Ctrl Bker

He said the central bank isn’t looking to halt or reduce private lending, but targets an evolution of private lending within “the normal zone”.

"Romania has neared the normal zone, the private lending-to-gross domestic product ratio, of about 40%, where Poland is. This ratio is higher in some European states, nearing 100%, but we and the Polish are at the lower end, as the European average is at 55-60%," Isarescu explained.

The central bank official said risks increase along with the fast development of the lending segment, and warned that banks often underestimate risk in their pursuit of profit.

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He said signals the central bank and the governor send out to commercial banks are not enough, and the central bank needs to increase provisions to slow down credit growth.

"It is extremely worrying to hear that people take loans to pay for household bills. A loan is taken out to be paid back, with interest, which is not ruthless, and from this point of view a loan is supposed to cover a temporary imbalance. But when the imbalance becomes permanent, that is reason for concern,” Isarescu said.

The central bank official added measures taken by the central bank and commercial banks will drive credit growth on a more sustainable path, toward corporations, investments and agriculture.
The central bank Thursday raised its main lending rate by 25 basis points to 10% and said it would keep a close watch on private debt.

End April, private lending in Romania rose to 81.75 billion lei (EUR1=RON3.6561), of which 75% were consumer loans.