Consumers and companies took out loans in RON and foreign currency worth 12 billion euros in the first ten months of the year, up 23% against 2006 and double against 2005.

Individual clients received the "bulk" of the loans granted by banks in the first ten months, having taken out almost 24 billion RON (7.2 billion euros) in loans - 59% of the total. The corporate sector failed to keep up the pace, although funding for real estate projects was quite dynamic, whilst bankers paid more attention to small companies, too.

"Loans for individuals increased rapidly, which was the result of relaxed lending regulations introduced in early summer. The structure of this growth is not very positive, because of the risks it entails," commented Ionut Dumitru, chief analyst of Raiffeisen Bank, pointing out that the trend of the portfolio quality after the significant depreciation of the RON this autumn remained to be seen.

More than 62% of the loans taken by individuals since the beginning of the year (that is the equivalent of 7.2 billion euros) are denominated in foreign currency, with the euro as the favourite.

Those who stand to suffer the most will be the individuals who took out loans in the summer, when the euro was at its lowest in several years (the exchange rate fell to 3.11 RON/EUR at the beginning of July), and banks relaxed the lending terms, agreeing to let the monthly instalment of loans reach as much as 70% of clients' incomes. Calculated in RON, the instalment on foreign currency loans increased at the same rate as the euro (which has gained over 15% since the beginning of July) so that it now stands at close to 80% of the incomes, thus leaving people with much less day-to-day spending money.

The NBR Governor recently warned that exchange rate volatility would be high in the coming period, although the RON would continue to appreci