Bank loans in Romania

The European Union may guarantee the repayment of bank loans to companies in an attempt to improve the latters access to crediting, especially in southern Europe, said the European Commission President, Jose Manuel Durao Barroso.

România Internațional, 13.06.2013, 12:13

The European Union may guarantee the repayment of bank loans to companies in an attempt to improve the latter’s access to crediting, especially in southern Europe, said the European Commission President, Jose Manuel Durao Barroso. Easier access to credit is essential to getting Europe’s economy on the growing path again. Xxx brings you a commentary on the issue written by Corina Cristea.

Romania is not unlike other European countries when it comes to bank loans for the population, which are currently at a very low level. Romanians’ reticence towards banks is explainable. Although the unemployment level in Romania has not yet reached alarming levels, the effects of the crisis are still visible, while job uncertainty makes people in need of a loan think twice before asking for money from banks. Banks, on the other hand, are mainly focused on loans to firms because the risks of giving loans to private persons are too high at the moment. In most such cases, the application for credit comes from people in desperate situations, explains the president of the Romanian Association of Banks, Radu Gratian Ghetea. He told a specialist forum that the relaunch of loans is closely linked to the restart of sustainable economic activity in Romania and that in his opinion, although banks have enough funds at the moment, there are few solvent applications for loans.

“The moment we see signs of economic growth and we have constant economic growth over several quarters, applications for bankable loans will start to appear as a result of the creation of a market, of a demand. Very few projects are considered bankable at the moment, and they only appear in areas that are safe. One such area is related to European funds, so a project that involves European financing has more chances to be considered bankable. Other relatively safe areas are agriculture, which is much more performing than other sectors, and local public administration.”

The main challenges facing the banking sector in the coming period, experts say, are the management of growing non-performing credits, the need to regain customer trust in lending institutions and the large number of insolvent cases among companies. On the other hand, bankers say there is room for the development of loans in the national currency, lei, all the more so as the fluctuations of the trade exchange rate puts people who have contracted loans in hard currency at a disadvantage. Moreover, interest rates for loans in lei will drop below 10% in the coming period, thus leading to a reduction in the cost difference compared to loans in hard currency.