Leasing and hire purchase contracts, as well as consumer loans and mortgages, will now all be taken into consideration when determining the creditworthiness of applicants for new credits.
Starting in August, the total value of all instalments and interest payments from all contractual commitments will not be allowed to exceed 40% of the monthly net income of an applicant and his or her family. In the case of housing loans, total monthly commitments will be limited to 35% of income (determined by deducting fixed monthly costs, such as utility fees, from the net salary amount).
At the request of the IMF, the National Bank has prepared a new set of guidelines that should reduce the appetite for loans among private customers, who either overestimate their debt capacity or actively look for loopholes in current regulations allowing them to receive loans from as many as 12 banks at once.
The draft guidelines for containing credit risk on credits aimed at private customers are to be debated by the National Bank of Romania''s board of governors on Friday, after consultations with commercial banks.
The effectiveness of the new measures will be limited since there is no database that can be used to verify statements by clients in which they are obliged to list all their debts at the time of applying for a loan. Banks are still able to request documents pertaining to the level of indebtedness of a particular customer, however the Credit Bureau is not collecting this so-called positive information about all the loans a customer currently has, even if they are up to date with repayment instalments. There is now an agreement in place under which this kind of information will be made available by a number of 21 lenders, including a leasing company, an insurance company and a consumer finance provider. Still the financing market for private customers is much larger, making strict control of a given person''s debt commitments very difficult. The main practical consequence of this will be an increase in red tape when applying for a loan, which could deter some applicants.
Formally, the stated purpose of the new regulations is to help reduce the aggregate demand and thereby induce a reduction in the current account deficit. The consumer lending regulations that came into force in early 2004 have failed to achieve this goal and did not even manage to stop clients accumulating overdue payments on more than ten loans.
Moreover, the fall in interest rates for loans in ROL has already expanded the leverage capacity of banking clients, casting one further doubt on the efficiency of the expected measures.
The new guidelines are set to come into force one month from publication in the Official Gazette, during which time banks will have to modify their internal lending rules.
Consumer credit norms will also be abrogated at this time (Norms 15/2003). However, guidelines for housing loans will remain unchanged. This is because a new set of laws on mortgages and mortgage banks is due to come into force in September.
Surprisingly, the draft guideline makes no special reference to foreign currency lending, despite a recent statement by NBR Governor Mugur Isarescu in which he said that restrictions in this regard were unavoidable. razvan.voican@zf.ro
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