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| Romania Does Not Give up Loans in Hard Currency |
| (2011-10-28) |
| Last updated: 2011-10-31 12:56 EET |
The governor of the National Bank of Romania, Mugur Isarescu, said Thursday at an economic forum that it would be a big mistake to stop loaning in hard currency because that would eliminate funding for home loans. He pointed out that Romania did not save enough to cover the whole amount of investments, therefore loans were needed. That is why one cannot eliminate hard currency loans from the market, because they provide the necessary balance. Mugur Isarescu:
Mugur Isarescu: “If we eliminate hard currency loans, funding for the construction of houses will disappear because no bank can run such a risk, namely to finance the building of houses from 6-months deposits for about 30-40 years. Of course, hard currency risk is also a problem. But it would be a very big mistake to stop hard currency loans.”
Mugur Isarescu said that a solid pension fund in Romania might boost investments, adding that long-term savings should be stimulated. The national bank official believes that the “First Home” program and the banks giving out mortgage loans bring more stability in the system because they involve saving. Isarescu believes that banks providing mortgage loans are not faced with the currency exchange risks because they use the national currency both for deposits and loans. Mugur Isarescu:
Mugur Isarescu: “The banks that provide home loans bring more stability in the system unlike general commercial banks that have a broader scope. They can also try speculative operations. Commercial banks create real estate bubbles. On the contrary, banks providing mortgage loans have restrictions. And because of these very restrictions, they cannot place their money wherever they want during the saving period; they cannot do anything else except for building homes, since this is their purpose. They give more stability to the system.”
The central bank has prepared regulations that will limit, among other things, people’s access to hard currency loans. According to the draft regulations, loans for consumption will have a 5-year maturity period at the most, and customers have to provide guarantees worth 133% of the borrowed amount of money, while for real estate loans in hard currency, more precisely in euros, the down payment will amount to at least 30%. The President of the Association of Romanian Banks, Radu Gratian Ghetea, has recently said that the new regulations of the central bank will be most likely applied as of December.
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