He explains the central bank of Turkey completely prohibited lending in foreign currency to consumers and even though the market did feel a certain shock, and customers could not understand what was going on, the change sank in after a few months.
Atay says the first impact will be a decline of the market and it will certainly take a while until people adjust to the new regulations, until they learn “they need to save a little before taking a loan, to get the necessary down payment, but it’s healthier that way.”
BNR wants to introduce new regulations requiring mortgage loan applicants to come up with a down payment of at least 30% for euro loans and 15% for lei.
In addition, consumer loans may no longer be granted for more than five years, which will drastically cap the amounts that can be borrowed for such use. Consumer loans will also require either a mortgage or an insurance policy.
Even though BNR published the draft regulation on its website, a public debate on the changes suggested was not encouraged. On the contrary, Radu Ghetea, chairman of the Romanian Banking Association (ARB) does not believe the amendments suggested by the banking community should be made public.
Commenting on the impact on the market of the attempt to steer demand towards mortgage loans in lei, Garanti’s boss Murat Atay believes it makes sense despite the higher price compared with similar euro loans.
He says the difference in price can be regarded as “an insurance policy”: the customer rests assured that they will not have any trouble because of the exchange rate over the twenty or thirty years of the loan, that they will not see the leu depreciating by 10% overnight and the amount to be repaid increase.
Loans in euros account for 60% of Garanti’s total loans granted to individual customers, which is similar to the market average. Retail banking accounts for 40% of the bank’s business, a percentage that will probably go down once BNR introduces the new regulations in October or November. The bank will try to compensate by boosting the corporate business, European funds included.
(English version by Loredana Fratila-Cristescu)