Romanian Household Lending Growth Seen Slowing In 2 Yrs

“Household lending will continue to grow for another year and a half or two years, perhaps at a slower pace, due to higher bank provisions and restrictions, such as a reduction in foreign currency lending,” Ghetea said during a financial seminar.

Romania’s central bank, which has raised its main lending rate five times in recent months to bring down soaring inflation, has also tightened bank-lending standards to curb strong lending growth.

Ghetea said the higher costs entailed by local currency lending due to the recent key rate hikes to 9.75% from 7% in October last year will be short-lived and banks will revert to their 2007 costs. Competition will force banks to lower interest rates and fees, Ghetea added.

“Loans in Romanian lei have higher costs, mainly due to the key rate increases, but those costs will be short-lived as the year 2012 draws closer and we’ll have to meet strict criteria to join the euro-zone,” Ghetea said.

Romania aims to enter the Exchange Rate Mechanism, or ERM-2, in 2012 and to participate in the ERM-2 for a period of two-years before adopting the single European currency in 2014, according to its euro-zone entry timetable.