This would bring SMEs in a similar situation to individuals.
“A modification of the regulation on lending in foreign currency is expected and this new regulation could put SMEs more or less ‘in the same category’ as individuals as far as foreign currency loans are concerned: if you have resources in foreign currency, you can access foreign currency loans, otherwise you can’t,” said Radu Ghetea, president of the Romanian Banking Association (ARB).
The interest rate differential has up to now prompted companies and individuals to assume the exchange rate risk and borrow in foreign currency at much lower interest rates than those charged for loans in lei. Moreover, banks largely had resources in foreign currency, so they preferred to lend in foreign currency. So the ratio of foreign currency loans to overall loans is close to 70%. SMEs have been significantly hurt by the crisis and many went bankrupt.
As far as lending in foreign currency to individuals is concerned, the latest regulations have been approved in the autumn of 2011. The regulations are meant to restrict consumer loans, while in the case of real estate loans customers who earn in lei have to make a downpayment of at least 25% on loans in euros and of 40% on loans in other foreign currencies.
The intention of changing the regulation on foreign currency loans to SMEs has also been included in central bank BNR’s Report on Financial Stability for 2012.
“The large ratio of foreign currency loans granted to SMEs (which are largely unprotected from the exchange rate risk) will probably lead to measures that will extend regulations on foreign currency lending to all debtors unprotected from this risk, SMEs included, in accordance with the recommendations of the European Systemic Risk Board,” the BNR report reads.
SMEs this year recorded a rising credit risk, with a rate of non-performing loans of 23.2% in July 2012, from 15.1% in December 2010, while for larger companies the ratio of non-performing loans was 4.3%.
The BNR will have to make a decision on regulating SME’s lending in foreign currency by the end of the year.
(English version by Daniela Stoican)