Private lending seems unable to get back on its feet. Theyear-on-year decline stood at 1.6% in March. Bankers are keepinginterests high to offset the losses caused by the unrecouped pastloans.
Interests on loans, and especially on consumer loans, have beenvery slow in going down in the past year, even though the NationalBank cut the monetary policy rate by almost four percent to 6.5% ayear. And although NBR Governor Mugur Isarescu has criticised theslow progress of loan interest cuts, bankers have argued every timethat the economic environment is riskier and this factor has to beincluded in the loan cost. Bankers are looking at the rate ofnon-performing loans, which is nearing 16% and including it in theloan cost so that the clients who pay on time offset the lossescaused by those who default on their loans. Therefore interests onconsumer loans in RON remain at over 20% a year, and companies pay14% a year for their lines of credit, NBR data reveal.
"Banks delay writing off non-performing loans (i.e. taking acertain loss), which creates a negative state of mind. Forinstance, everyone on the real estate market believes prices willgo down when banks start cleaning up their balance sheets and moveto forced sales," says Matei Paun, partner of BAC InvestmentsRomania investment bank. Assuming losses would entail a need tocontinue to cut costs for bankers - which means closing branches,laying off people and cutting salaries, or even a need forrecapitalisation.
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