The volume of loans in RON fell by nearly 9% in real terms inAugust, with the decline deepening in the last few months despitethe NBR (National Bank of Romania) holding the key interest rate at6.25% a year.
Therefore, the proportion of loans in Romanian currency in theoverall amount of non-government loans fell to 37.6% from over 40%a year before. This means the channel through which the centralbank can convey its monetary policy decisions into the economy isnarrowed even further. In fact, the NBR encouraged lending inforeign currency by reducing minimum reserve requirements forforeign currency from 40% to 25%, whilst reserves in RON only fellfrom 20% to 15%, being frozen since July 2009.
The biggest decline was recorded between August 2009 and August2010 by loans in RON for individuals, with volumes falling by over5%. Not even the First Home scheme was able to heighten interestfor financing in Romanian currency.
RON-denominated loans fell by a monthly 0.6%, to 78.2 billion RON,slowing down the rise of overall non-government loans to 0.2% inreal terms. Non-governmental lending amounted to 207.7 billion RON(49.4 billion euros) at the end of August.
On the other hand, loans in foreign currency rose by nearly 250million euros last month, with the lower interest rates and therelative stability of the exchange rate encouraging the populationand companies to borrow in euros and avoid the localcurrency.
The volume of foreign currency loans went up by 0.8% in August forvalues expressed in euros, to 30.4 billion euros. However, analystssay banks encourage lending in euros because it is rather difficultfor them to attract long-term cash in RON.
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