Tightening Lending Standards in Romania for Non-Financial Companies and Mortgages in 2023

Thursday, June 8, 2023, 4:18 p.m

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Romanian banks have considerably tightened the lending standards for loans granted to non-financial companies, considering the risks regarding the economic perspective and the specific situations of some industries or companies.

The most risky activity sector is still considered to be energy, followed by industry and construction.

The standards for loans granted to the population have undergone similar changes, especially for mortgages, against the background of the general economic uncertainty, as well as from the real estate market.

Fourth consecutive quarter of tightening

The National Bank of Romania published the Survey on lending to non-financial companies and the population in the first quarter of 2023.

Credit institutions in Romania continued the cycle of tightening credit standards for loans and credit lines granted to non-financial companies at an aggregate level and in the first quarter of 2023, for the fourth consecutive quarter.

Banks indicated the tightening of lending standards to the same extent for loans granted to both segments, SMEs and corporations, regardless of maturity.

For the second quarter of 2023, all banks responding to the survey expect to maintain lending standards for loans to non-financial companies, both at the aggregate level and for the categories and maturities considered, SMEs and corporates, and long-term and short-term, respectively.

Housing prices remain constant

Lending standards were also tightened in the case of the population, both for loans contracted for the purchase of housing and land, as well as for those intended for consumption.

According to the domestic banks that participated in the survey, in the second quarter of 2023 all types of loans granted to the population will keep their lending standards unchanged.

The tightening of mortgage lending standards in the first quarter of 2023 was driven by expectations regarding the general economic situation, but also by other factors such as the monetary/prudential policy decisions of BNR and expectations regarding the evolution of the real estate market, in the sense of changing the probability of the occurrence of a rapid and sharp fluctuation in the price of real estate.

Around 70% of the banks participating in the survey believed that the price per square meter of a home remained constant in the first quarter of 2023, while more than 28% of them believe that it has increased to some extent.

Expectations for the next quarter are to maintain the average price, according to 92.8% of the banks.

Regarding the demand for loans, credit institutions indicated a mixed evolution.

Specifically, they recorded a lower demand for credit from non-financial companies, while, in the case of the population, demand for housing and land loans fell and that for consumer loans was moderately higher.