Private lending seems unable to get back on its feet. The year-on-year decline stood at 1.6% in March. Bankers are keeping interests high to offset the losses caused by the unrecouped past loans.

Interests on loans, and especially on consumer loans, have been very slow in going down in the past year, even though the National Bank cut the monetary policy rate by almost four percent to 6.5% a year. And although NBR Governor Mugur Isarescu has criticised the slow progress of loan interest cuts, bankers have argued every time that the economic environment is riskier and this factor has to be included in the loan cost. Bankers are looking at the rate of non-performing loans, which is nearing 16% and including it in the loan cost so that the clients who pay on time offset the losses caused by those who default on their loans. Therefore interests on consumer loans in RON remain at over 20% a year, and companies pay 14% a year for their lines of credit, NBR data reveal.

"Banks delay writing off non-performing loans (i.e. taking a certain loss), which creates a negative state of mind. For instance, everyone on the real estate market believes prices will go down when banks start cleaning up their balance sheets and move to forced sales," says Matei Paun, partner of BAC Investments Romania investment bank. Assuming losses would entail a need to continue to cut costs for bankers - which means closing branches, laying off people and cutting salaries, or even a need for recapitalisation.

Private lending seems unable to get back on its feet. The year-on-year decline stood at 1.6% in March. Bankers are keeping interests high to offset the losses caused by the unrecouped past loans.

Interests on loans, and especially on consumer loans, have been very slow in going down in the past year, even though the National Bank cut the monetary policy rate by almost four