Bank lending may pick up in second half this year

Ana Sabiescu, 9 Feb 2010

Romanian version

Credit to homes and businesses will pick up most likely in the second half of 2010, or first half of 2011, said the central bank governor Mugur Isarescu and deputy governor Cristian Popa. Even though banks could take steps to restart lending, surging unemployment will keep ‘wannabe’ borrowers on the sidelines.

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Lending will pick up gradually

The National Bank of Romania cut the main lending rate last week by another 50 basis points to 7% in a bid to stimulate national currency lending, as last year the non-governmental credit fell 3.6%.

“Lending will pick up gradually but it won’t be across-the-board. We can already see banks taking different approach to lending”, said Mugur Isarescu (photo), adding, that “banks are still reluctant to loosen credit-quality standards”.

But the central bank will not encourage fx lending, notwithstanding the positive outlook for the leu.

On the other hand, banks say credit risk is still high, which doesn’t allow them to soften lending rates by as much as the central bank or borrowers would like. Banks’ no1 threat is the NPL ratio in their loan books, coupled with the growing unemployment rates.

“We don’t have a detailed picture of how the economy would perform when we will emerge from recession. We might follow the same pattern as the other countries”, said Isarescu.

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Bank lending may pick up in second half this year

Lending will pick up gradually

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