Erste CEO Welcomes Romanian Ctrl Bk New Household Lending Rules

He said that even though well known international banks are active on the local market, Romania is not a priority for most of them, while local management, very well trained as it may be, ignores the strategy and responsibilities assumed on an international level.

He added a boost in lending is good for economic growth, but it is dangerous when money is given to people who cannot pay it back.

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.

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The new regulation initially obliged lenders to conduct stress test analyses to assess each potential client’s ability to repay the loan in stressful conditions, but official sources told MEDIAFAX Monday that the central bank could drop the stress-testing requirement and introduce lending risk scenarios  applied  on banks’ entire household lending portfolio.

Several bankers expressed discontent with the central bank’s draft regulation, while economic analysts said they expect 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.