Romanian Bank Officials To Discuss Ctrl Bk Debt Ceiling Draft Regulation Friday

Volksbank Romania president Gerald Schreiner said each lender will present its standpoint until Wednesday with respect to the central bank’s draft regulation, while a face-to-face meeting between bank officials will take place Friday.

Volksbank Romania officials said Tuesday the central bank’s draft regulation must clearly separate aggressive lenders on the consumer loan segment from conservative lenders whose operations are based on a prudent risk policy.

Herwig Burgstaller, Volksbank vice-president for corporate risk and retail risk management, told a press conference Tuesday Volksbank will have no problem implementing the central bank’s regulation, as they have also conducted stress test analyses so far, which they included in their products, but, stressed the central bank should make a clear distinction between conservative lenders with a low consumer loan portfolio and aggressive lenders on this segment.

Burgstaller said the central bank’s draft regulation makes no difference whatsoever between lenders in terms of risk strategy.

On Jul 8, the central bank issued a draft regulation setting that Romanian lenders are to consider incomes up to 20% higher than those the borrower stated with fiscal authorities in the previous year to calculate the debt ceiling allowed for household lending, and not just salary statements and documents currently. The central bank initially said it expects comments and observations on the regulation by Jul 16.

The new regulation would also oblige lenders to conduct stress test analyses, to assess each potential client’s ability to repay the loan in stressful conditions, based on information available targeting a period of at least 18 months prior to the assessment, using the highest interest rate possible, or the highest level of depreciation of the domestic currency, including for indexed loans, and the highest level of fees perceived by the lender in the mentioned period.

Several bankers expressed discontent with the central bank’s draft, while economic analysts said they expected such measures to slow down credit growth.

The regulation will be applied within 45 of when it comes into force, and banks will apply a debt ceiling of 40% of the client’s income at most until the central bank approves lending rules for each bank.

The central bank extended until Jul 31 the period for public debates on its draft regulation after several commercial banks required the extension.

In March last year, the central bank softened household lending rules, allowing each bank to set its own rules.

Central bank governor Mugur Isarescu warned repeatedly in recent months that private debt in Romania is on a fast track and lenders tend to underestimate risks.