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NEW LENDING RULES IN ROMANIA - Risk of exclusion for self-employed

Romanians drawing income from rentals, pensions, copyrights, management, agency or administration contracts will be the ones who will have a harder time taking out loans following the implementation of the new crediting norms drawn up by the National Bank of Romania (BNR), Credit Zone reports in a press release.

Following the modifications performed by banks in their mortgage-backed products, the wage earners will be the least affected by the new crediting policies.

After the coming into force of the BNR crediting norms, loan applicants who are not salaried, cannot afford down payment and have no co-debtor will have no access to mortgage loans, says the release.

Findings in a recent Credit Zone report indicate that 80% of loan applicants are wage earners.
The tax statements of the previous year requested by the BNR to be produced to prove wage earning has become a mandatory document when loan applications are filed.

Official press releases from banks to Credit Zone reveal modifications in the bank’s loans, such as loan cost increases of 1-2%, discarding promotional offers and periods of grace.
Requirements in the case of mortgage loans and mortgage-backed personal loans will undergo major changes as far as the income of applicants is concerned. All types of incomes will no longer be accepted, and wage earners will have to provide proof of income length.

The BNR norms request that indebtedness accepted by banks shall be computed against categories of applicants, loan types and assumed forex risk.
Total indebtedness shall be computed as the weight of total payment commitments of the loan applicants minus subsistence expenses.
The cut to 50% in the accepted indebtedness rate shrinks the loan maximum by up to 30%. In order to take out a loan in excess of the maximum, the applicants shall pledge the additional income of a co-debtor.

Co-debtors may be a family member or a third person who will pledge to pay back the loan and who signs the loan contract with the loan applicant.
The new regulations limiting crediting was approved by BNR this August and the banks had 45 days to get in line and draw up their own internal norms.
The regulation regards mainly the banks with lax crediting rules that currently accept indebtedness rates of up to 70% and accept many types of income on the part of the loan applicants in case of personal loans.

In the case of loan granters which credit individuals based on internal crediting rules at the time the new BNR regulation comes into force and which have not received the approval of BNR, the highest acceptable indebtedness rate is put at 35%, according to the provisions of the regulation limiting credit risks on individuals published by BNR on August 22.

The regulation requires the banks to request customers to produce tax statements and calculate the highest indebtedness rate in a differentiated manner. Thus, the creditors shall assess the capability of loan applicants to pay back the loans based on an eligible income level, which shall not exceed by more than 20% the level of the previous year. There are exceptions in the case of incomes the applicants may prove to be continual.

Banks are also placed under the obligation to set indebtedness rates against categories of customers, loan destination (mortgage, personal), type of loans (forex-tied, indexed, type of interest, length of time, behaviour and guarantees) and also allowing for risks, including forex risks, exchange rate risks, interest risks and the risks of increases in loan costs.

ID: 42023
Author(s): iff
Publication date: 31/10/08

Created: 31/10/08. Last changed: 31/10/08.
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