Andreas Treichl, the chief executive of Erste Bank and chairman of BCR's Supervisory Board, has called for an agreement with the central bank and all other commercial banks that would cause a revolution on the lending market.
The purpose of this: to contain the foreign currency lending as much as possible, starting with consumer loans, which should only be granted in RON.
"Over the past six or eight weeks we have managed to gain the attention of the European Central Bank and of central banks in Romania and Hungary, we have had discussions with Governor Mugur Isarescu and Andras Simor. I believe it is quite likely that we will see some action taken to contain the foreign currency lending as much as possible in the next six months," Treichl said.
Therefore, both countries would get rid of one of the main vulnerabilities that affect the risk perception of the foreign analysts.
"The biggest problems with foreign currency lending are in Romania and Hungary. Both countries need to have a major interest in containing this phenomenon which affects the capability of the central banks and governments to control foreign deficit and inflation," Erste's head says.
He believes retail financing in foreign currency cannot be really contained unless concerted action is taken together with national central banks and ECB.
"Local central banks say they hate foreign currency lending, but they cannot stop it without ECB's help, which will have no discrimination among currencies. Even ECB itself admits it's a big problem, and the approach is a 'let's try to solve this' one."
Moreover Treichl says the other banks in Romania may consent to stop granting consumer loans in foreign currency.
"Consumer finance in foreign currency is really stupid. Unfortunately, there are some banks that are really pushing lending in foreign currency." This is not a new idea on the market. It was first brought up by Steven van Groningen, Raiffeisen Bank's chairman three years ago and then reiterated by Radu Gratian Ghetea, CEC's chairman early this year. "The National Bank welcomes the idea of stopping the foreign currency lending. This is an important issue and it is good the banking community brought it up. Perhaps the banking community can fix it, too, comments Adrian Vasilescu, NBR governor advisor.
Andreas Treichl says he is adamantly against lending in exotic currencies, although admitting Erste Bank did resort to this method to boost its share on various markets in the past.
"We too did it, when we were smaller, but gave it up and we will not do it again under any circumstances. Financing in Swiss francs or yen exposes the banking system to a huge funding risk, because these are hardly liquid currencies and the available funds may simply dry up even with off-shore financing."
Consumer lending in exotic currencies simply skyrocketed in Romania last year, with the entire volume across the banking system having increased eight times until now, to the equivalent of 1.4 billion euros.
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