Realising they belong to a limited segment all banks are "fighting" for, very good companies took advantage of this fact to get extremely cheap loans. And effects showed especially on the foreign currency loans market, where interests levied in relation to this customer segment registered a considerable drop.
Radu Gratian Ghetea, prime deputy chairman of Alpha Bank, considers that this tendency is likely to cease, as interest rates got close to the costs supported by banks. Lacking a specialised expression, bankers talk of dumping, but at an informal level, since the term is not appropriate for this banking practice.
"The term of dumping is exaggerated, but the reality is that, paradoxical as it may sound, Romania is an "overbanked" market: there are too many banks pursuing too few good customers," says Doru Lionachescu, Citibank Romania deputy chairman.
"This fact triggers discrepancy and sometimes, I would say, ungrounded and unprofessional competition, in granting cheap loans to this limited number of companies."
This tendency has taken shape during the last two years and is part of a general process in which interests for foreign currency loans are going down, Radu Ghetea states. This fall was induced by foreign or foreign capital banks that had access to many cheap funds from abroad, which they mostly got from the mother-bank.
He mentions that six-seven years ago interests came to 16-17 percent, even 18 percent, 3-4 years ago they amounted to 15-16 percent, while two years ago an interest rate of 12-13 percent did not frighten anybody.
"Now things are a little different; LIBOR, plus a margin are taken into discussion. In the case of very good customers, the interest gets to about 10 percent (if a risk margin of 2-3 percent is added to LIBOR - the benchmark interest on the international market, which recently stood at 7.29 percent). In the case of less important customers or in the case of those who cannot come up with guarantees that can be put to value on the spot, such interests are ruled out from the very start: LIBOR plus 5-7 percentage points can be reached," Ghetea maintains.
Competition is felt only in the case of simple products, the overdraft and loan in the classical conception, which are differentiated only by their price and which any bank can offer, Doru Lionachescu says. Things change when large sums of complex financing (export pre-financing, syndication) are involved, since these can be offered by few banks, he adds.
"The very high pressure on the credit market comes from small and medium banks that came late on the market and whose only chance of getting a small market quota is their offering cheaper loans than the other banks or employing less rigorous crediting standards," Lionachescu considers.
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