Aggresive relaunch of lending no earlier than 2010

This is the message of some of the most important bankers on the local market interviewed by Business Standard regarding the relaunching of lending and the short-term evolution of interest rates on loans. Bankers say that, even though interest rates began sliding, Romania must wait until the second half of 2010 for a full relaunch of lending. “Rates on euro are mostly influenced by the country risk. If government measures restore the confidence of the international community in the Romanian economy, the perception regarding the country risk will improve, and the costs for foreign currency will drop. Here, banks have a relatively minor influence,” the President of Raiffeisen Bank Romania, Steven van Groningen, told Business Standard. He indicated that the rates on lei are determined by the central bank’s monetary policy, and a sudden drop would lead to the depreciation of the leu, with a strong negative impact on those who already have foreign currency loans. Lenders are strongly criticized for maintaining the interest rates high, thus preventing the access of companies and individuals to financing.

“We, banks, are often criticized. We either lend too much or too little. Nobody should be surprised that lenders are more cautious now. We continue to work on raising efficiency and consequently need to cut costs, even risk-related costs. At present, not only demand, but also supply is much lower than before,” the Chief Executive Officer of Erste Group, Andreas Treichl, said. A solution for a rapid reduction in interest rates is, according to some bankers, direct state intervention. “But Romania’s CDS [credit default swap] is still high, because of the status of the central budget. It cannot be compared with the Czech or Polish levels, and leads to a higher cost of funding for the Romanian banks,” Chief Executive Officer of OTP Bank Romania, Laszlo Diosi, said.

“This is a free market, in which the market sets the conditions. If the government wants lower rates, it can introduce interest rate subsidy programs, or can create better macroeconomic stability, which would result in lowering CDS,” Diosi added. Dominic Bruynseels, the CEO of the largest bank on the local market, Banca Comercială Română (BCR), said that, demand in retail lending is still low at present, mainly on the consumer loan segment, while one can see a growing demand for mortgage loans.

“On the corporate lending side, there is a continuous growth trend of demand, but at a lower pace compared to last year. Interest rates are dropping, and the trend will continue in the context of sufficient liquidity on the market, which is a good base for a relaunch in lending to the extent that the economy is recovering,” Bruynseels said.