Banks active in Romania could lose over EUR 500 million if the Government Ordinance (OUG) 50/2010 stays in its current ambiguous form, according to the head of the Romanian Banks Association (ARB), Radu Gratian Ghetea (in picture).

The Romanian Consumer Protection Office has launched the idea the total cost of a loan can be changed only if the customer agrees, said Ghetea, with customers being advised to go to court against banks if they fail to agree. The Banks Association has calculated the possible impact over the banks' revenues if OUG 50/2010 will be applied in its initial form, taking into account a EUR 25 billion loan portfolio. The calculations showed a possible financial impact between EUR 450 and EUR 900 million in unrealized revenues for banks during a year.

The Romanian banking system made a EUR 193 million profit last year, according to ARB, quoted by Agerpres, and posted a loss in the first half of this year.

OUG 50/2010 has already been applied in Romania, mirroring the European legislation in the field, which demands higher transparency in setting loan interests. However, Romanian bankers complain Romania was too drastic in applying the European directive, having included extra measures, among which one saying the interest rate change is applied to existing loan contracts. Unhappy customers have already teamed up and started calling banks to court, trying to reduce the cost of their existing loans. 400 BCR customers have done so and 700 Volksbank customers are preparing for a similar move.

For many Romanians with loan contracts, this could be a much needed safety net, as the number of those who fail to pay their monthly installments has increased  on lower revenues and increasing unemployment. 500,000 Romanians fall into the riskiest customer category, those holding three loans. They had EUR 3.2 billion in debt mid-year and a non-performing rate of 13.4 percent. Most non-performing loans are under RON 5,000 (EUR 1,190), according to the Romanian Central Bank (BNR). The biggest non-performing rate was accounted by credit cards and consumer loans without guarantees – 12.3 and 10.5 percent respectively. Mortgage loans have a non-performing rate of only 3 percent.

editor@romania-insider.com