The regulation concerning consumer lending will push the Romanian society towards "civilized lending", which represents an act of normalcy, Mugur Isărescu, the governor of the NBR explained yesterday. He added that most non-performing loans are concentrated in banks which granted the most number of consumer loans.
The governor warned that the Central Bank shouldn"t be criticized for encouraging consumption, and said that a 20-year consumer loan is "nonsense".
Mugur Isărescu said: "I"ve seen this kind of weird reactions when the Central Bank imposes restrictions which prevent borrowers from taking out 20-year consumer loans. A normal, common sense discussion will tell you right from the start that a 20-year consumer loan is nonsense. Lending and the maturity of loans have a philosophy of their own. (...) There have been banks which, in their rush for market share, and for bonuses, and I"ll stop here with the ironies, granted consumer loans with a 20-year maturity. They are rather few, just two or three. They have the most non-performing loans".
He said "that no car or refrigerator can be used for 20 years".
Mugur Isărescu advised bankers to correctly price loans denominated in foreign currencies and to warn their customers of the risk they involve. Furthermore, he warned bankers that if they venture into "this kind of lending", the Central Bank will request additional provisions and capitalization.
The Governor has also said that he encourages cheaper loans in lei, because "that"s where the balance will come from".
* Isărescu: Regulations for lending in foreign currencies is being prepared on a European level
Mugur Isărescu said that next week will see the release of the European Central Bank and of the Systemic Risk Council on loans denominated in foreign currencies.
"Next week you will see that what we are doing is j
