National Bank of Romania says reform first, credits next

The Romanian economy needs credits to develop, while PM Adrian Nastase requested NBR to cut interests as to match the inflation decline in order to allow as many companies and individuals as possible to apply for financing.
The National Bank, however, says that the main obstacle impeding on the increase in lending is the poor restructuring of the Romanian economy and of the labour market.
“A credit is not something a client can take for granted, it has to be “earned” by clearly proving the repayment capability. At the moment, there are a lot of unrestructured enterprises in Romania, which shows in the high company-to-company and company-to-budget debt level,” National Bank of Romania vice-governor Mihai Bogza told Mediafax in an interview.
The lending has indeed increased over the last two years, with banks having to turn to individuals and corporates because investments in T-bills have gradually become less profitable. The non-governmental lending in real terms has gone up 30%, a level deemed as significant. At the same time, the share of credits granted to individuals, who usually behave themselves when it comes to repayments, has gone up about three times if relating it to the total non-governmental lending.
“We also have to consider the instability of the labour market here, caused by a delay in restructuring and acting as an obstacle. Many people are afraid to take a loan because they do not know whether they will remain employed over the next few months and therefore have a salary to repay the loan from. This is also why banks are reluctant in granting credits,” Bogza explained.
Interests on credits have visibly gone down following inflation’s lead over the last twelve months, a trend also caused by the fact that the banks have too much cash and hardly any options to invest it.