Consumer lending in foreign currency sees big surge

As the exchange rates for the national currency against the euro and the US dollar have not altered in a while and since foreign currency rates are three times smaller than interest on ROL-denominated loans, most consumer lending is being contracted in foreign currencies. In fact, consumer lending in foreign currency went up 22% in June, to 10,725 billion ROL (260 million euros).

Moreover, the total balance of foreign currency consumer lending went up 5.5% in June, clearly outpacing the growth of ROL lending (0.5%), the National Bank of Romania (NBR) said on Monday.

“The population must have perceived foreign currency loans as being cheaper. Following the National Bank’s latest move, the interest rates for these credits will go up, which will trigger a slowdown in their growth pace. The significant number of these loans is not dangerous, although it would be interesting to see exactly just how many of these loans are actually turning into investments,” says Florian Libocor, an analyst with BRD-Groupe Societe Generale.

Consumer loans posted 4% growth in June, compared to May, up to 61,760 billion ROL (1.5 billion euros).

This data confirms the concerns voiced by the National Bank over the proliferation of foreign currency lending and last week’s measures to curb it.

ROL loans grew only 0.74% in May-June, up to a total volume of 51,035 billion ROL (1.24 billion euros). Thus, the share of ROL-denominated loans out of total consumer loans has dropped, from 85.2% in May to 82.6% in June.

The growth pace of consumer lending slowed down in June, as compared to the 7% level registered in May. These loans have posted an oscillating trend since the beginning of the year, after the restrictive norms and regulations imposed by the National Bank of Romania entered into effect in January.

The balance of mortgage credits surged seven percent in June, up to a total of 26,365 billion ROL (647 million euros). Mortgage credits in foreign currency, however, went up nine percent in the May-June interval, to 22,743 billion ROL (558 million euros).
liviu.chiru@zf.ro