“Since they did not understand our message about lending terms for individual customers in the past, we came up with these new regulations wherein we explained in detail the conditions to grant consumer loans to people both in terms of maturity and currency,” Cinteza said.
“Most past due loans taken by individual customers fall into the less than 20,000 lei (over EUR4,500) consumer loan bracket. They are small in terms of amount but there are very many of them.”
According to the draft put up by the central bank for debate, consumer loans can be granted for up to five years and the applicants have to come up with guarantees worth 133% of the loan.
“What I’ve seen over the last few years is that debtors find it easier to stop repaying simple consumer loans, which are not backed by a mortgage. We’ve come to a situation where debtors say when stopping repayment that banks should pay, too,” Cinteza adds.
“Psychologically, default on a mortgage loan is extraordinarily low, but high in case of consumer loans. It is these consumer loans that created the biggest problem for both the lender and debtor.”
The new lending regulations for individual customers are now on the desk of BNR’s Board of Directors, after the public debate was considered ended, and banks sent a number of amendments.
Banks generally want more permissive terms in the new lending regulations, saying that they know better how to assess risks through their own regulations. Between 2005 and the summer of 2008 banks granted loans to consumers around the clock, in an attempt to gain market share. Risk was pushed down to third place in terms of importance, as banks thought debtors and economy could only do better and better.
Crisis proved otherwise, and salary cuts both in the private and public sectors made many people seek rescheduling or refinancing of their loans. Some even stopped paying, especially if they had a consumer loan to repay. Some banks were even forced to turn to their shareholders for capital to cover losses from non-performing loans.
What happened after the onset of the crisis was also a lesson in risk assessment and loan-granting behavior for BNR. This is why the central bank says the more restrictive regulations are an attempt to educate both bankers and consumers.