Foreign currency loan provisions up 3 percentage points

To temper rapid non-governmental loan growth, BNR has decided to increase provisions for foreign currency loans by two percentage points for clients exposed to foreign currency risk, part of the “standard” category, and by three points for “under observation,” “sub-standard” and “doubtful” categories. As such, provisions on standard loans will amount to 7 percent of their value, those under observation 8 percent, sub-standard loans 23 percent, and doubtful loans 53 percent.

The BNR measure is meant to highlight a distinction in terms of influence of foreign currency risk assumed by individual debtors by supplementary provisioning of foreign currency loans for individuals who are exposed to foreign currency risk (persons whose income is not in the currency of their loan). Lenders are obliged to transmit modified internal loan regulations to the central bank within 30 days of the publication of new stipulations in Romania’s Official Gazette, to ensure that these meet the new demands of the National Bank of Romania. Each commercial bank will be affected differently by this decision, but the cost of foreign currency loans will rise. “As concerns the increase in provisions, a measure decided in Monday’s session, we opted for a medium-range value, to allow banks to continue offering affordable foreign currency loans, in spite of voices in the Board of Directors who were insisting on a much higher increase,” said Isarescu.