September will end with lower interest rates for ROL-denominated loans. The market leader made the first move; those right behind it are staying put to maintain competitiveness and the rest of the players will make sure they are not left on the sidelines. The reduction of interest rates across the market is preparing the ground for a new autumn outbreak of consumer lending.
The banking market leader, Banca Comerciala Romana (Romanian Commercial Bank - BCR) decided to respond to the expectations building on the market of a reduction of interest on ROL loans and announced adjustments by up to three percentage points, effective as of today.
The exception is for interest rates on ROL-denominated mortgage credits, which will remain where they are. In the case of corporate loans, cuts will go as far as to two percentage points.
BRD-SocGen, the second leading player in the banking system, has not made a decision regarding a concrete reduction of interest rates for ROL loans, yet it's clear where it's heading.
"We will certainly react to the signals sent out by the central bank through its cumulated rate cuts. We never make our moves so as to mach those of our competitors. We make decisions to modify interest rates based on our own evaluations, on the concrete elements on the market," Sorin Popa, BRD deputy chief executive, stated.
The third bank on the market, Raiffeisen Bank, will not delay an interest reduction much longer.
"We have already considered lowering interest on ROL loans and will probably announce the new interest rates next week," Rasvan Radu, Raiffeisen Bank's vice-president for retail operations told Ziarul Financiar.
With the National Bank of Romania's benchmark interest down two and a half percent from what it was three months ago, the entire market was expecting to see one of the 'big three' make the first move towards an interest cut, knowing that the rest of the banks would not take long to follow in its footsteps. That is due to the battle for market shares on the retail segment. Since the banking market is still highly concentrated, the top three banks account for more than half of the total system's assets. Therefore it only takes one of them to adjust interest rates to induce a trend across the entire market.
The reduction of ROL interest rates could somewhat temper the market's appetite for credit in foreign currency, which peaked this summer. This was due to the fact that interest on loans in ROL was still high, and the exchange rate stability mirage was working.
Before being able to say that the gap between the two funding options is narrowing, it remains to be seen how the increase in the minimal mandatory foreign currency reserve, recently operated by the central bank, will be reflected in the price of euro and dollar-denominated credits.
"From where we stand as the leader of the banking-financial system, we believe this is the right time for a positive response to the signals sent out by the market," stated Natalita Hurduc, BCR's executive vice-president.
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