This is the conclusion of the “How to Rebuild Trust Between Banks and Entrepreneurs” conference organized by Ziarul Financiar and Volksbank, Kredyt Inkaso and Crosspoint on Tuesday.
“The biggest problem of the entrepreneurial sector is the insolvency law,” said Nawaf Salameh, chairman of spirits producer Alexandrion.
Many entrepreneurs abused the insolvency law to get out of debt, which ruined the banks’ trust in them. However, what is needed is for the bankers to get closer to their customers and understand their business and not just review loan applications from an office by only looking at papers, he added.
Bogdan Neacsu, corporate vice-president with Volksbank, says that bankers do try to understand their customers’ business, but cannot ignore the risks, which became obvious mainly during the crisis.
“In 2009, banks started to become aware of the risks or consequences of a time they granted loans in a specific way. The entrepreneurs must look, at their business and come up with projects that can be financed because the bank cannot tell then where and what to invest in.”
The banking system has a lot of cash and unless the money gets invested in the real economy, it will go abroad, Neacsu added.
What he means is that local banks used to rely on foreign currency lines of credit from their parent banks abroad and now this money is going back to Austria, France, Greece or Italy, as the loans mature because it can no longer be put to profitable use in Romania. About 40% of such lines of credit were repaid during the crisis, with the current volume standing at about EUR13 billion.
Corporate loans stood at 112 billion lei (EUR25 billion) at the end of September, about RON11 billion lower than at the same last year, according to Romania’s central bank data.
“The good news is that new loans have been rising lately,” says Lucian Croitoru, advisor to the central bank governor.
Central bank data show an increase in the stock of loans only in industry, agriculture and services in the past year. Banks are still unable to boost the volume of new loans because, besides the repayment of already existing loans, there is also the impact of the non-performing loan cleanup process on the balance sheets.
“Our company’s role is to speed up lending. We take care of the recycling of loans, of everything that post-lending entails,” says Andrei Mocanu, general manager of debt collection specialist Kredyt Inkaso.
“This has been a historic year because banks sold more secured loans than unsecured loans. We manage about EUR500 million, and small and medium enterprise and corporate loans make up one third of the portfolios.”
Codrin Matei, managing partner of Crosspoint Investment Banking & Real Estate says that banks focused on rolling over loans and on postponing the moment they had to acknowledge the losses rather than anything else.
“Some banks reached an agreement with their clients, others chose to sell their loans in blocks, but financially speaking, I do not think this is the best decision for banks.”
(English version by Loredana Fratila-Cristescu)