Banks response: risks are high
Bankers say they are willing to give loans in local currency, because they are safer for clients as they don’t factor in any currency risk, but on the other hand, lenders don’t give up high interests so easily citing increasing default risk.
Ghetea, CEC Bank: Margins measure risk
“We shouldn’t allow Romanians to borrow in another currency to that in which their income is paid”, said Radu Gratian Ghetea (photo), chairman of CEC Bank, one of the two credit institutions owned by the state.
“However, Ghetea continued, margins have always been metrics for the risk. Some banks call them risk margin, others call them profit and risk margin. In a crisis-hit economy, risks are enormous, and banks must react and be reticent when they take such risks. This reticence is reflected in risk margins because in the event of default, the bank has to have the money to cover its losses and make loan loss provisions”.
Rekkers, Banca Transilvania: NBR must cut the reserve requirements for lei to 2%
“It would be preferable if the reserve requirements for leu liabilities were cut to 2% in Romania. This is the RRR-level in the euro area and this is where Romania should be, especially if we want to resuscitate consumer interest for loans in domestic currency. It is a normal measure, especially if the inflation rate is falling”, said Robert Rekkers (photo down), CEO of Banca Transilvania. The current level of required reserve ratio for leu-currency liabilities for commercial banks is 15%.
Parvu, Piraeus Bank: Default rate for loans in lei is two-fold higher than for loans in foreign currency
The default rate for loans in domestic currency is twice higher than for loans in foreign currency, said Catalin Parvu, CEO of Piraeus Bank Romania, which would eventually lead to higher margins for riskier loans.
Oprescu, Alpha Bank: Default risk is factored in the market costs
“Before approving a loan application, you can’t ignore the default degree of the market segment to where the money will go. Therefore, the default rate, like it or not, is factored in the market costs”, said Sergiu Oprescu, CEO of Alpha Bank.
In Romania, the number of delinquent loans tripled over the last 12 months, to €1.55 bln at the end of September 2009.
Subsequently, banks’ loan loss provisions increased by 6.5% in August month-over-month to €3bln, and by 89.4% year-to-date, data provided by the National Bank of Romania show.
Ghetea, CEC Bank: Margins measure risk
“We shouldn’t allow Romanians to borrow in another currency to that in which their income is paid”, said Radu Gratian Ghetea (photo), chairman of CEC Bank, one of the two credit institutions owned by the state.
“However, Ghetea continued, margins have always been metrics for the risk. Some banks call them risk margin, others call them profit and risk margin. In a crisis-hit economy, risks are enormous, and banks must react and be reticent when they take such risks. This reticence is reflected in risk margins because in the event of default, the bank has to have the money to cover its losses and make loan loss provisions”.
Rekkers, Banca Transilvania: NBR must cut the reserve requirements for lei to 2%
“It would be preferable if the reserve requirements for leu liabilities were cut to 2% in Romania. This is the RRR-level in the euro area and this is where Romania should be, especially if we want to resuscitate consumer interest for loans in domestic currency. It is a normal measure, especially if the inflation rate is falling”, said Robert Rekkers (photo down), CEO of Banca Transilvania. The current level of required reserve ratio for leu-currency liabilities for commercial banks is 15%.
Parvu, Piraeus Bank: Default rate for loans in lei is two-fold higher than for loans in foreign currencyThe default rate for loans in domestic currency is twice higher than for loans in foreign currency, said Catalin Parvu, CEO of Piraeus Bank Romania, which would eventually lead to higher margins for riskier loans.
Oprescu, Alpha Bank: Default risk is factored in the market costs
“Before approving a loan application, you can’t ignore the default degree of the market segment to where the money will go. Therefore, the default rate, like it or not, is factored in the market costs”, said Sergiu Oprescu, CEO of Alpha Bank.
In Romania, the number of delinquent loans tripled over the last 12 months, to €1.55 bln at the end of September 2009.
Subsequently, banks’ loan loss provisions increased by 6.5% in August month-over-month to €3bln, and by 89.4% year-to-date, data provided by the National Bank of Romania show.