Consumer loans granted from 2005 through 2008, biggest headache for banks

The high volume of unsecured loans banks granted between 2005 and 2008 is currently spawning big problems for banks, with the weight of bad loans in overall loans granted during this period revolving around 15%, according to the data included in the latest financial stability report published by the NBR.
By comparison, the weight of bad loans in the case of real estate loans granted between 2005 and 2008 stands at around 3.5%.
Individuals and companies in late June held loans worth 310bn RON (72bn euros), with the largest part as foreign currency-denominated ones. One quarter of this amount were loans granted by foreign banks and 9% were loans issued by non-bank financial institutions (NBFI).
Over the past year and a half, foreign banks have boosted the volume of loans granted in Romania, while domestic banks have kept their exposure flat.
Provisions set up by banks in June covered 63% of the value of bad loans, against a coverage level of above 120% in late 2006. The coverage level is similar with the average posted at the EU level.