NBR: Banks must acknowledge their past mistakes, even if their profits drop
Banks must acknowledge their past mistakes and not impose financial penalties on borrowers, even if this would reduce their profits, said the senior economist of the National Bank of Romania, Valentin Lazea (photo), adding that an interest margin of 7.3% was “unacceptably high”.
The net interest margin for new retail loans in domestic currency (the difference between the interest income generated by banks and the amount of interest paid out to their lenders, for example deposits) increased sharply this year, to 7.3% in August 2009 from 2.4% in December 2008. Throughout this period, the interest margin for new loans and deposits in euro currency climbed to 4.1% from 1.7%.
“The banks are killing the hen that could lay golden eggs. They are so focused on lending the governmental sector in domestic currency, that it is absolutely natural to suck the life out of non-governmental loan since banks can invest in state securities in national currency and don’t have to take any risk with private clients”, said Valentin Lazea, at a conference organized by Ziarul Financiar and CEC Bank.
NBR’s senior economist also warned banks that “compensating the past mistakes with high margins is of no good for anybody”.
In terms of euro, the loan to deposit ratio fell from 2.09 at the end of last year to 1.85 in September 2009, while for loans in other currencies, the ratio climbed to 2.82 in September this year, from 2.79 at the end of 2008. System-wide, the loan to deposit ratio dropped to 1.23 in September 2009 from 1.31 in December 2009.
The net interest margin for new retail loans in domestic currency (the difference between the interest income generated by banks and the amount of interest paid out to their lenders, for example deposits) increased sharply this year, to 7.3% in August 2009 from 2.4% in December 2008. Throughout this period, the interest margin for new loans and deposits in euro currency climbed to 4.1% from 1.7%.
“The banks are killing the hen that could lay golden eggs. They are so focused on lending the governmental sector in domestic currency, that it is absolutely natural to suck the life out of non-governmental loan since banks can invest in state securities in national currency and don’t have to take any risk with private clients”, said Valentin Lazea, at a conference organized by Ziarul Financiar and CEC Bank.
NBR’s senior economist also warned banks that “compensating the past mistakes with high margins is of no good for anybody”.
In terms of euro, the loan to deposit ratio fell from 2.09 at the end of last year to 1.85 in September 2009, while for loans in other currencies, the ratio climbed to 2.82 in September this year, from 2.79 at the end of 2008. System-wide, the loan to deposit ratio dropped to 1.23 in September 2009 from 1.31 in December 2009.