The volume of foreign currency loans taken out by individuals doubled in August against the same month last year, and climbed to over 30 billion RON (almost 9.4 billion euros), according to data from the NBR (National Bank of Romania). Against July 2007, foreign currency loans for individuals went up by as much as 14.2%, with this spectacular increase being triggered by the accelerated appreciation of the RON. Overall, loans in foreign currency witnessed an annual rise of 73.2% in euros, while loans in RON went up by as little as 34.3% in real terms. The result of these different rises - for the first time since March 2006, foreign currency credits have become dominant in the banking system, accounting for 50.6%, according to NBR statistics, which does not include domestic bank loans that are "outsourced" to the balance sheets of their parent banks. This return to the euro's dominance brings back into question the effectiveness of the measures taken by the NBR regarding the interest rate, the main instrument with a direct impact on foreign currency crediting policies for credit institutions being the minimum mandatory reserve in foreign currency, which is already at a very high level (40%). Non-government lending also went up in August, and saw a 50.2% increase against the same time in 2006, to 122.09 billion RON (over 38 billion euros). In July, the annual growth stood at 46%. "If depreciation of the currency in which people receive their incomes continues, against the currency in which they take out their loans, they could default on their payments, because they are unable to acquire the necessary foreign currency to repay their instalments," said Florian Libocor (photo), chief analyst at BRD-SocGen.
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