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Banks Say Personal Insolvency Law Will Raise Lending Costs

Romania's adoption of the personal bankruptcy law is an additional risk for banks and will raise costs for household lending, especially for mortgage loans, according to Steven van Groningen, vice-president of the Romanian Banking Association ARB.
Banks Say Personal Insolvency Law Will Raise Lending Costs
23 mart. 2010, 15:46, English

The law will be applied mainly to clients contracting high loans, van Groningen, who is also the president of Raiffeisen Bank Romania, said Tuesday.

Romanian senators enacted Tuesday a legislative proposal on the insolvency of individuals, which states that the insolvency procedure aims to cover debts against the loan contractor, adding that, in case of personal bankruptcy, the assets of the loan contractor will be liquidated in view of covering the debt.

According to the draft law, the contractor who willingly requested and accepted the initiation of insolvency procedures can be completely or partially relieved of debts registered before or after the initiation of the procedure, if the contractor’s assets are insufficient to pay the entire debt and if the court grants the contractor the benefit of veniality.

Van Groningen said the law will force the banks to increase their interests for the retail loans, especially for the mortgage loans, in order to cover the refinancing risk.

The legislative proposal on the insolvency of individuals is pending debates in the Chamber of Deputies, which will make it law.