Bankers contemplate rate cuts for fear of loan delinquency

Bankers are starting to consider ways of making loans cheaper, for fear that the high interest rates overlapping the depreciation of the RON might render clients unable to repay their instalments.

Volksbank, which had positioned itself as one of the aggressive loan vendors, will cut the rate on already granted mortgage loans in euros by up to 1.5% starting February, while Banca Romaneasca is considering a similar move.
 
"There are banks that pay 18-21% a year to attract deposits in RON but this also forces them to make loans more expensive. We do not need cash that much and would rather be cautious about what we pay for deposits. We are not raising the price of credits to avoid making it difficult for clients to repay their instalments," commented Gerald Schreiner, Volksbank chairman.

He says he will try to offer "good" rates for both deposits and credits, but will not position as the player with the lowest interest rates for savings.

Most mortgage loans in euros have their interest rate indexed to the three-month EURIBOR, which is currently three percent lower than in October. Meanwhile, the risk premium for foreign financing in Romania's case has gone up by 5 or 6%, a cost that offsets the effect of the EURIBOR decline.

"We are considering a potential cut of the interest rates on retail loans, but have not made a decision yet. It depends on the cost at which we secure our funding," says Andreas Maragkoudakis, chief executive of Banca Romaneasca, the local branch of the National Bank of Greece.