Banks cannot count on collateral pledged for loans as the legalsystem is too protective of debtors and almost hostile to lenders,Misu Negritoiu, general manager of ING Bank, told Mediafax in thefirst public statement since the start of the insolvencyproceedings of Flamingo group, with 17.5m-euro debt to thebank.
ING on December 9 notified Flamingo group on the initiation ofcompulsory execution of collateral (inventories) on the grounds ofloan contract breaching, but one day later the retailer filed forinsolvency to protect itself from lenders.
Flamingo group is the third largest player in electronic homeappliances retail, with 200m-euro turnover in 2008.
"Most Romanian companies are trying to avoid, on the one hand,compulsory execution of collateral and on the other hand and thepayment of loans they no longer need or support with their ownoperations. In calculating a sovereign risk the institutional,legal, capacity for compulsory execution of collateral alsomatters. And, in our country the system protects debtors and isalmost hostile to lenders," Negritoiu said.
A rising number of bankers are complaining about the behaviourof entrepreneurs, who are protecting their money, even sending itabroad, instead of supporting their own firms, for which they filefor insolvency.
"Banks will be facing trouble from this point of view: they areunable both to recover loans and foreclose upon collateral,"Negritoiu says.
He considers 2010 will be the year of truth, when the way firmsand banks share losses will be seen, after in 2009 the focus was ondelaying payments.
The problems with compulsory execution of collateral are a riskfactor for banks, which come to "inflate" the costs of loansgranted, which is why such high interests are charged inRomania.
A repeat of the 2009 scenario, when the state borrowedaggressively from banks to cover its expenses, thus leaving verylittle money for the private sector, is the biggest risk for theeconomy in 2010.
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