In an attempt to nudge the market towards lending in RON, the National Bank is trying again to raise the price of the foreign currency lending, after the previous measure taken in February failed. Thus NBR''s Board of Governors has decided to extend the mandatory requirement for banks to set up a minimal reserve of 30% to all the funds raised in foreign currency, regardless of maturity and the date when they were raised.
The decision comes at a time when lending in RON accounts for less than 40% of the total non-governmental credit, the foreign currency lending''s growth pace has reached an all-time high of 64% and lending in domestic currency saw only an increase of only 17.7% in May 2005 compared with May 2004.
Behind all these movements is precisely the wall against which every attempt of NBR to put a damper on foreign currency lending is banging: the rate spread. The average rate on the new loans in euro at the end of May was 9.4%, whilst the rate on new loans in domestic currency was 20.9%. Which is more than double. Rates did not go down that much in May, albeit the cash attracted by the NBR from the market went down by more than 6% from April, therefore banks had more money available for loans in domestic currency.
Even though promotional rates for credits in RON, closer to 10%, have come up in the recent weeks, actual annual interest rates exceed 15-16%.
Furthermore, the market has not shown any more signs of decline for the interest in RON but on the contrary, seeing as the inflation burst out again. NBR''s monetary policy interest rate has been stuck at 12.5% per year since April. The benchmark interest, which is the monthly weighted average of the interests on the market, rose from 7.96% to 8% in June.
A definitive factor that undermines attempts to discourage lending in foreign currency is the trend of the exchange rate of the domestic currency. The stability of the euro at around 36,000 ROL for four months in a row has killed every perception of the foreign currency risk that had possibly formed from December 2004 through February 2005, which had seen heavy exchange rate fluctuations. The exchange rate went down to less than 3.6 RON/EUR early in July and has stayed there. Which means the RON equivalent of an instalment on an euro-denominated loan has gone down. The market continues to be driven by the perception of a RON appreciation trend maintaining, induced precisely by the central bank.
Under the circumstances, it is hard to believe that adopting administrative measures can defeat the evidence that it is better to take out a loan in euros instead of RON.
Is an increase in the interest on the foreign currency loans to be expected, now that the NBR has decided to up costs for banks'' minimal reserves?
"Interests on loans in foreign currency should normally go up slightly, yet they will probably remain unchanged due to the competition on the market. Banks would rather reduce some of their spreads, going as far as to cut rates to keep boosting volumes," comments Cristian Sporis, Raiffeisen Bank''s executive in charge of treasury and arbitrage. razvan.voican@zf.ro
Pentru alte știri, analize, articole și informații din business în timp real urmărește Ziarul Financiar pe WhatsApp Channels
