„The NPL ratio, according to the definition of the European Banking Authority, dropped to 13.11% in April 2016 and is likely to fall below 10% in the near future. One needs measures aimed at stimulating the financial, contractual and payment discipline. This is the effect of discipline proved by the banking system, without help from any other state,” Sergiu Oprescu, Chairman of the Executive Board of the Romanian Banking Association (ARB) and executive president of Alpha Bank, told a press conference on Thursday.
Before the economic crisis, NPLs in Romania accounted for only 2% of total loans and, after the financial crisis broke out, Romania added 19 percentage points to its NPL ratio. Nevertheless, capital infusion and cash inflow led to a current net NPL ratio of just 4%.
Bank interest rates reached record lows, both in Romania and worldwide, but both banks and customers must consider the risk associated with their increase and therefore, must not speed up lending, because loans granted under these conditions can turn into NPLs when interest rates rise, according to Oprescu.
ARB statistics shows banks in Romania sell leu-denominated mortgage loans at a current interest rate of 3.5%, compared with a rate of 12% in 2010. Moreover, “low margins are an advantage for consumers, but they are not good for investors willing to open bank units in Romania,” Oprescu explained.