Romanians only borrow in foreign currency

The volume of loans in RON fell by nearly 9% in real terms in August, with the decline deepening in the last few months despite the NBR (National Bank of Romania) holding the key interest rate at 6.25% a year.
Therefore, the proportion of loans in Romanian currency in the overall amount of non-government loans fell to 37.6% from over 40% a year before. This means the channel through which the central bank can convey its monetary policy decisions into the economy is narrowed even further. In fact, the NBR encouraged lending in foreign currency by reducing minimum reserve requirements for foreign currency from 40% to 25%, whilst reserves in RON only fell from 20% to 15%, being frozen since July 2009.
The biggest decline was recorded between August 2009 and August 2010 by loans in RON for individuals, with volumes falling by over 5%. Not even the First Home scheme was able to heighten interest for financing in Romanian currency.
RON-denominated loans fell by a monthly 0.6%, to 78.2 billion RON, slowing down the rise of overall non-government loans to 0.2% in real terms. Non-governmental lending amounted to 207.7 billion RON (49.4 billion euros) at the end of August.
On the other hand, loans in foreign currency rose by nearly 250 million euros last month, with the lower interest rates and the relative stability of the exchange rate encouraging the population and companies to borrow in euros and avoid the local currency.
The volume of foreign currency loans went up by 0.8% in August for values expressed in euros, to 30.4 billion euros. However, analysts say banks encourage lending in euros because it is rather difficult for them to attract long-term cash in RON.