Why loans are expensive: banks are inefficient and lack the appetite to lend

When banks need to include a 4% margin in the cost of a loan only to cover administrative charges, from employees' salaries to rents for offices and suppliers, the lack of efficiency is obvious, says Lucian Croitoru, NBR governor's adviser.

While bankers have repeatedly underscored their efforts to slash costs, two years after the onset of the crisis branch networks and the number of employees are only slightly down from the 2008 peaks, though monthly loan sales went back to 2006 levels.

Still, why do administrative charges have the biggest weight in the interest rate of a loan, when most banks levy a monthly loan "management" fee among other things?

"There will always be justifications, accurate or not, for prices. Ultimately, the price reflects your attitude as supplier to clients, how much you want to sell. If banks were really motivated to release loans, they would find ways to cut interest rates," comments Radu Craciun, investment manager with Eureko Pensii.