Which is the most worthwhile credit: the lei or foreign currency-denominated one? At a first glance, the answer is the dollar-denominated credit because it is cheaper and the interest rate is relatively low, unlike the interest levied in the case of the lei-denominated credit. And since the foreign currency Regulation no longer includes restrictions in using credits, firms that operate cashing-ins and payments in lei were allowed to contract foreign currency-denominated loans. Moreover, the times when the domestic currency was rapidly and unforeseeably depreciating are quite over.
But not all players on the credit market see things in such a simple way, including banking industry professionals. This is because bankers are the ones to put money into circulation, more precisely about 80 percent, and they have a say in this matter. They warn that, in the case of customers that, by the specific character of their activity exclusively develop operations in lei, caution is better than cutting down costs and more complex financing can be conceived for customers that need lei and foreign currency.
"The best alternative is not a fixed recipe and the most appropriate option has to be studied by the customer together with the banker," says Radu Gratian Ghetea, Alpha Bank prime deputy chairman. "The customer needs to understand that, when a bank advises him to borrow in a certain currency, this is firstly because the bank wants to get its money back, and not because it should gain more than in the case it granted a credit in another currency."
Manager have to pay attention to the firm's exposures, Doru Lionachescu, Citibank deputy chairman, reminds: "If the firm has no foreign currency cashing-ins, therefore no natural hedging for this exposure, it is risky for it to borrow in foreign currency. And granting a credit under such conditions seems equally risky to me."
"As a general rule, we, Citibank, do not even discuss with someone who applies for a foreign currency loan without the loan being part of the company's cashing-ins cycle, only with the mere justification that the manager considers it cheaper. As a banker, I cannot take upon the risk that, in case a massive devaluation should occur within three months, the respective customer should come and say he is sorry but can only pay 80 percent of the loan because he does not have his own foreign currency resources," Lionachescu added.
In his opinion, managers of companies with no foreign currency covering are counting on imprudent reasoning. "They look at the leu/dollar interest difference on the last six months and think it will be the same during the next six months. Yes. I do agree, this is what the market tendency is suggesting: that we will not witness explosions on the foreign currency market. But history is no guarantee for the future. And in the case of small and middle-sized companies, a sudden devaluation, such as the one occurred over the last years, can sweep away what has been accumulated for years."
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