BNR could give the green light for relaxed mortgages

This is the first sign sent by BNR for a relaxation on lending, after the central bank issued harsher lending rules last fall, aimed at curbing consumption and lowering risks for both lenders and their clients.

The decision could be passed on Thursday, during the BNR Board of Directors meeting, and bankers could grant more relaxed loans as soon as the new regulation is published in the Official Gazette.

Each bank would be allowed to increase the degree of indebtedness depending on its lending history on this segment and the risk profile. The current maximum level of indebtedness is 30-55 percent depending on the bank and the client’s income. “If you are good, you lend, if you are not, you stand by (...) It is possible that some banks are not doing well, so we will treat each lender accordingly,” BNR sources told Business Standard.

“It is very likely that the rules will change this weed. Based on this change, we will be encouraging those with lower incomes,” the sources added.

Easier lending could end the serious deadlock registered on the residential market in the past few months. Many potential buyers were forced to change their minds because they no longer had access to mortgages, which prompted several developers to freeze or cancel projects. Prices dropped last year by as much as 30 percent, in some cases, for old apartments.

Bankers repeatedly requested the central bank to relax the rules and ease lending, and to consider a different approach for mortgages and consumer loans.

“I hope that mortgages are helped to revive in 2009 because, so far, activity on this segment is blocked. We want the regulation to be improved, so that mortgages are dealt with differently than consumer loans,” according to a recent statement by Radu Gratian Ghetea, President of Romanian Bank Association (ARB). ARB members met BNR officials on Friday to discuss the issue. They are to convene again today or tomorrow.

Meanwhile, BNR is analyzing the quality of the mortgage portfolio, to decide whether there is poor performance in the system. Banks with significant arrears on this segment could be forced to continue with the current regulations, which significantly reduce the amount that a client can borrow.

November, the first full month during which the harsher rules were applied, led to a 3.09 percent advance in lending, calculated in lei, and to a downturn for the amount calculated in euro (€5.24 bln), due to the depreciation of the national currency.