Romanians with RON-denominated incomes are finding it significantly harder to pay instalments for the CHF loans they took out in the context where the Swiss currency's exchange rate has climbed by over 20% compared with last summer.
Between February 4 and March 4, the average exchange rate of the Swiss franc stood at 2.28 RON, that is 20.6% above the average value of July 2007, when it stood at 1.89 RON.
Daily data are pointing to even steeper volatility. The Swiss franc early this month climbed to 2.37-2.38 RON, thus marking a 27% increase from the 1.87-1.88 lows reached in July 2007.
The rising exchange rate directly translates into higher instalments for people with incomes denominated in the Romanian currency, who have to buy Swiss francs to pay bank instalments.
Such a strong increase in monthly instalments may bring trouble, particularly to those who chose a higher indebtedness degree once banks eased up lending norms last summer.
NBR' latest data show that loans contracted by the population in other currencies than the RON or euro amounted to the equivalent of 1.8 billion euros last December.
The Swiss franc is the main currency included in this category, considering the appetite for dollar loans has almost died out.
Early last year, the amount of loans in "other currencies" stood at only 0.4 billion euros, but had soared 4.5 times by December, considering that no less than seven banks (including top players such as Raiffeisen, Bancpost or Volksbank) had included this type of financing in their offer since the autumn of 2005.
Bankers tried to make use of the marketing advantage given by the possibility to display some smaller interest rates. Moreover, the low interest rate allows for higher amounts to be granted compared with RON or even euro alternatives. Customers thus risk seeing the interest rate rise after the fixed-interest period, which also leads to higher monthly instalments.
Raiffeisen and Volksbank officials had said last autumn that half of the new home equity loans were Swiss franc denominated.
The rapid increase in Swiss franc-denominated loans started worrying the Romanian central bank, though. Governor Mugur Isarescu last month cautioned bankers to "dissuade" customers from contracting loans in this currency, underlining the high foreign currency risks.
As commercial exchanges with Switzerland are at a low level, the NBR calculates the RON/franc rate indirectly, through euro/franc quotations.
Over the past month, the Swiss franc has also advanced against the euro, with quotes sliding by 6% from October until March. The Swiss franc is traditionally seen as a safe asset and is sought by investors during periods of financial market turmoil, like the recent months.
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