In their rush to borrow money, five Romanians ended up having to repay loans taken from no less than 17 banks, according to data released by the Credit Bureau at the end of 2008.
The extent of the risk that the banking system is facing given the abrupt depreciation of the RON and the increase in interest rates can be gauged from the fact that more than 1.5 million clients owe money to at least two banks, which can cause contagion effects in case a client defaults on their instalment payments.
All in all, at the of 2008, more than 4.4 million Romanians showed as owing money in the banks' books, after more than four years when retail was the keyword for all players in the financial industry. The total number of loans exceeds 7 million, considering the total number of employees in the economy is 4.79 million, in addition to almost 4.7 million pensioners.
Until late 2007, banks had not been very concerned about the clients' indebtedness, paying more attention to their market shares instead. It was only two years ago that they agreed to have the Credit Bureau centralise positive information, as well, which means reporting the total amount borrowed by a specific client, even if their loans are not delinquent. The Central Bank allowed for a relaxation of the lending norms in the summer of 2007 (which took the indebtedness cap from 30-35% to a maximum of 70% of the income) only for those banks that also reported positive information to the Credit Bureau.
The borrowing frenzy that buried many clients under massive debt is now starting to show its negative side. In November alone the individual customers' delinquent loans went up by 10% to 990 million RON (some 262 million euros), according to the NBR data, which takes the information from the Credit Bureau. Delinquent loans from August through November reached 75 million euros.
"We see a decline on overdue loans of individuals in December. Still, the outlook is pessimistic, considering the depreciation of the exchange rate and the increase in interest rates lately," comments Serban Epure, general manager of the Credit Bureau. He did not reveal the extent of the decline, though.
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