The two key factors that trigged the decline were the restrictions imposed on foreign currency lending by Romania’s central bank in 2010-2011 and the shift of the First Home scheme to leu-only loans as of 2012.
The significant decline in leu interest rates brought the costs of a leu loan down to almost the same level as the costs of a euro loan. Euro loans used to be twice cheaper than leu loans during the boom days and that was their main selling point.
“One thing that had a really powerful influence on the euro-denominated lending was the indebtedness level allowed for leu loans and moreover, there is also the visible foreign exchange risk apprehension of the customers,” says Vlad Elias, managing partner of loan broker Cooper Pear.
“Customers no longer see any benefits in taking out foreign currency loans, the down payment and the interest rates are lower for leu loans and the indebtedness level higher.”
Whereas euro-denominated loans have significantly shrunk, the leu loans have soared in the past two years, beyond the peak of 2008.
Leu loans granted to individuals and companies reached a record high of 5.4 billion lei (EUR1.2 billion) in June, 50% higher than in the year-ago month and RON100 million above the previous record set in the spring of 2008, several months before the onset of the financial crisis.
Aggregate euro loans stood at EUR280 million and most of them went to corporate customers. Corporate loans therefore stood at EUR255 million and consumers only took out EUR25 million loans. Exporters usually prefer euro loans because this is the currency of their revenues.
(English version by Loredana Fratila-Cristescu)