Until the Government devises a draft normative act to regulate non-bank lending more strictly, such as those granted by leasing companies or consumer finance companies, the NBR again intends to tighten the knot around bank lending in order to prove to the IMF that it really has adopted measures that will dampen lending by August.
Adopting measures to restrict foreign currency lending cannot be avoided, since the burden of limiting the foreign deficit needs to be shared in an economic policy mix, said NBR Governor Mugur Isarescu.
He believes that although the main goal of the central bank is to set prices, restoring the foreign balance cannot fall to taxation only, given the budgetary pressures that already exist.
a??I am not pleading the case of Ionut Popescu (Public Finance Minister), but that of a balanced policy mix,a?? he explained.
On the other hand, the governor admitted that during the long inflation curbing process some of the levers had lost some of their effectiveness, pushing authorities to adopt administrative and less popular measures.
a??The IMF Negotiator for Romania has requested that the NBR make an effort and publicly explain that it was not a matter of a halt or stagnation in lending, rather it was a matter of tempering its growth,a?? the NBR Governor said.
According to a draft sent to commercial banks for consultation, the share of total monthly instalments owed by a private borrower should be limited to 40% of that persona??s income. The NBR introduced two norms on lending to private borrowers in February 2004 that set debt servicing at 30% for consumer loans and 35% for housing loans. Experience shows that while the growth in bank lending did slow down, the trade deficit and implicitly the current account deficit have maintained an ever-steeper upward trend.
At the same time, the measure has failed to limit the possibility of customers taking out loans from several banks at once, and in some cases people owe money to up to 12 banks at the same time.
Only by expanding the database of the Credit Bureau with verified information will it be possible to exert stricter control over the debt limits for specific customers.
Bankers believe introducing new restrictions on lending to private borrowers will not produce the desired result of helping to help cap foreign deficit growth.
a??The share of retail credits as a proportion of GDP was 5.5% in Romania at the end of 2004, over 11 times lower than the euro zone, where it accounts for 55%. In addition, Romaniaa??s GDP per capita is three times lower than in the euro zone.
So, even though we have had very fast growth up to now, there is still a lot of room for further expansion,a?? Eugen Radulescu, CEC chairman, told a conference organised by Finmedia yesterday.
The new regulations for containing the speed of credit growth, which may soon be adopted by the NBR, will be ineffective, like those introduced in 2004, believes Radu Gratian Ghetea, chairman of the Romanian Association of Banks. liviu.chiru@zf.ro