In its meeting of 15 January 2009, the Board of the National Bank of Romania approved the amendments to Regulation No. 11/2008 amending and supplementing NBR Regulation No. 3/2007 on limiting credit risk associated with loans to households.
The NBR Board approved the aforementioned Regulation in August 2008 (implemented starting October 2008) with a view to strengthening the prudential framework and improving risk management in relation to household loans amid the ongoing crisis on global financial markets. Furthermore, the NBR stated that it would assess the impact of the Regulation on lending activity in January 2009.
The analysis reveals that default rates are considerably lower among debtors with mortgage collaterals compared to other categories (e.g. unsecured consumer loans).
In light of these assessments and in order to limit the fallout of the global crisis on the domestic economy, the NBR Board has deemed appropriate to make a distinction between lending requirements on mortgage-backed loans and those applicable to other loan categories, which requires amending the Regulation.
Hence, the Board of the National Bank of Romania has decided that, based on in-depth analyses, lenders would have the possibility to calculate a higher indebtedness level for the borrowers that would have high-quality real estate assets as collateral for their credits.
It should be mentioned that, in its capacity as a regulatory and supervisory authority, the National Bank of Romania defines the general framework for risk management in relation to credit institutions and non-bank financial institutions with a view to safeguarding financial stability.
However, it is up to lenders themselves to set the actual lending and risk management conditions via their own lending rules, provided that they comply with the NBR guidelines in this field. Under these circumstances, lending developments hinge mainly on lenders' capability to sustainably raise the necessary financial resources and simultaneously on their compliance with prudential principles.
The new provisions will enter into force as of their publishing date in the Official Gazette.