Euro hike leaves many Romanian bank customers high and dry

The U.S. dollar yesterday plunged close to a three-year low, with the single European currency climbing to 1.0539 USD.
Although many analysts had already deemed the euro increase as exaggerated, uncertainties regarding the American economy and the looming war against Iraq are taking their toll on the international markets. The prognosis for the 31st of March points to 1.07 U.S. dollars for one euro.
The euro has gained 1.5% in the first nine days of 2003, having been quoted at 35,5375 ROL yesterday by the National Bank of Romania (NBR). The single European currency is thus almost 27% more expensive in ROL as compared to January 2003.
This uninterrupted ascending trend is becoming quite painful for those that took credits in euros in June-July last year, since they are already losing money, unlike those with ROL-denominated loans.
“The costs can only grow for those who have to pay euro credits, while their income is ROL- or dollar-denominated. If we take a look at the figures, a credit contracted last year in euros is practically comparable with a ROL loan which bears 37%-39% interest. Given the rate cuts for the Romanian leu, it is obvious that ROL credits were the right way to go,” says Marius Stoica, deputy general manager with the market operations division of BRD (Romanian Development Bank).
The ROL depreciation against the euro has picked up the pace, as the increase of the single European currency against the dollar between January 2003/January 2002 is already 16%.
According to analysts, the euro increase will have an even greater impact upon companies and natural persons once the National Bank launches the direct EUR/ROL quotation.
“The National bank has told the market that those who contract foreign currency loans, without deriving their revenues in the same currency, may get into trouble. Let’s hope that this euro increase will not last long,” Valentin Lazea, NBR chief-economist, told Ziarul Financiar.
Increasingly more companies and natural persons resorted to euro-denominated loans last year. The euro became the dominant currency, at least in the case of leasing contracts.
The share of euro credits in the total loans granted by banks had grown 5.4% in the first ten months of last year, exceeding 30%. At the same time, the number of loans in ROL and USD was on the decrease.
According to available data for the January-October interval, the share of ROL credits had dropped from 29.7% to 27.6%, while USD loans accounted for 41.7% of the total in October, down from the 44.7% posted in January 2002.
“My first waking thoughts go to the euro. I have bought a house and a car with euro credits. I didn’t even have a choice with the car leasing, since every contract comes in euros,” says the customer of a bank.