Romanian banking system does not need the help of the state, Patrick Gelin, BRD chairman states, but rather stimuli to help the economy, especially the big infrastructure works. The trend in a lot of states in Western Europe is to inject capital on banking markets in exchange of higher profit and also bring in banking deposits and inter-bank transactions. Although some Australian bank representatives suggested Romanian authorities should use the Western example of sustaining players with systemic roles, bankers are fully aware of the fact that the state’s involvement in banking markets brings forth restrictions such as dividend cutbacks or policy adjustments. Patrick Gelin says it all depends on each state’s ability to overcome the crisis period, but no major interventions are necessary. He thinks the main focus should be on providing a clear direction for economic policy. Because it is hard to predict the evolution of the economic crisis so will be the strategy regarding Romanian banks. Gelin insists that BRD foresaw the financial crisis since the beginning of 2008.

The global crisis has affected so many fields, the real estate one not being an exception. As much as 30% of the new housing construction works are to be suspended in Romania’s capital, Bucharest, as well as other major cities such as Cluj, Timisoara, Brasov and Constanta leading up to 50,000 workers to be laid off.
The Romanian Contractors’ Association (ARACO) declared that the activitity in the fiels is cancelled due to harder lending conditions, low apartment sales, lack of proper funding for developers. Some of the suspended projects are: Sunset Residence in Bucharest (developed by Hungarian-based Ablon), Central in Constanta (by Norwegian company RomReal) and Quadra 2 in Bucharest (by Conarg Real Estate).

After first starting to arrive in Spain several years ago, the Romanians have also been hit by the ongoing recession and they are still reluctant to come home. They sent home more than 2bn euros and they consider Spain to be their real home, only coming back for the holidays. Romanians recommended each other to workplaces and now there is at least one Romanian working in a bar or in a restaurant. Many of them still hope to return to Romanin once its economic growth will start.
Regardless of the economic conditions, not many of them are thinking about returning home. Agriculture is still a field where the job opportunities still exist along with free acommodation and a free deal, despite de low wages.
According to the National Statistis Institute from Spain, the number of Romanian immigrants is by far the largest counting up to 700,000 while in 2007 it was just 200,000.

The fear of high interest rates that may be difficult to pay is making bankers want to cut rates. Loans might become cheaper since the Romanian national currency, the RON, is depreciating and thus it is harder for clients to pay their installments.
Gerald Schreiner, chairman of Volksbank, says that banks pay a high interest rate in order to attract clients but this leads to more expensive loans. Volksbank does not intend to raise the price of credits and it will try to offer adequate rates for deposits and credits.
The EURIBOR system has mortgage loans with interest rate calculated to three months and that number is three percent lower than in October. In the case of foreign financing in Romania, the risk premium has climbed up to 5 or 6% and this leads to a decline in EURIBOR effect.
Andreas Maragkoudakis, chief executive of Banca Romaneasca, the local branch of the National Bank of Greece, admits that the bank is taking into consideration a cut in interest rates on retail loans but a decision is yet to be made.

Next year, it’s the banks’ turn to witness a decline in profit rates. According to Steven van Groningen, Raiffeisen Bank Chairman, a decrease in the banks’ profits will be seen because of two main reasons: the high interest rates at which they attract resources and the increase in provisions regarding credit risk. Small and large banks, no differences in how the crisis affected them, have started adding additional provisions since the interest rates in credits have rose si the clients are no longer able to pay the instalments due to the depreciation of the RON. The situation got worse in October and November and therefore the risk of corporate clients not having how to pay their instalments has grown. This also lead to a rise in interest rates. (more…)

Dacia, the biggest car manufacturer in Romania, has decided to stop the production for the fourth time. This time, the production will be stopped for a month, because of poor sales on the local market and increased second-hand car sales. The production is due to be halted between 11th of December 2008 and 11th of January 2009. The sales for the local car plant have dropped 50% in November in comparison with last year’s production. The first periods of ceased labor were as following: 30 and 31 October, 13 and 14 November, 20th of November untill 7th of December. Dacia has almost 14 000 employees that will receive 85% of their wages and food coupons for the duration of this scheduled operation. Dacia will have a reduced investment budget for next year, with a drop of almost 100 million Euro.

Worldwide, the clothing industry is among the next to be hit by the continuing decline in the purchasing power. The clothing industry has been decreasing in numbers of employees by 53,000 in less than a year’s time while on average per plant the reduction of the staff counts hundreds of people. All of this comes only to emphasize that four years ago thousands of people were working in the manufactoring section of plants. In Romania, four plants in Roman with 50 to 100 employees had to close operations in the last five months. Even Comoconf who produces for the Dolce & Gabbana famous brand and Gruppo Ibis, another clothing manufacturer, had to terminate their work. Sorin Chiriac’s statement, general manager of the clothing manufacturer Caremil Roman, only comes to stress out the data of the clothing industry: “Orders fell both in October and in November by 50 %. Apart from our three sections, we are also collaborating with another five or six smaller ones, but we no longer had work for them”. In order to cover for their losses, the company now produces for the Romanian market the brand Sense.

The average price for an old apartment in Bucharest has reached 1,576 euro/square meter going down by 6 % compared with the previous month and by 16 % compared with the beginning of the year. According to Bucharest Real Estate Indix(BREI) in the sixth district of the capital prices reached 1,310 euro/square meter with a 13 % decline.
Another index, ZF real estate, takes into account the prices from an online apartement buying ads website and the statistics say that the prices for three-room flats have decreased by 12 % and even by 20 & in some areas in Bucharest such as Iancului, Mihai Bravu, Olteniei. Companies tried offering price cuts to sell their apartments even though the prices remained the same for October and November.
Colliers International which put together the BREI data state that “”Although the asking price remains constant, developers continue with the promotional offers of the summer or launch new ones to boost sales”. The financial situation has lead low numbers in sales due to higher interests rates and harsher lending terms and the buyers were waiting for the new created crisis to lead to a dropping of the prices.
Some demand was expected to appear from speculative investors, but they too reduced their operations.
Still some flat owners carry on and insist on asking for the same prices. (more…)

Clients who want to get a loan have a more restrictive criteria to follow. Even if they pass this difficult test, the amount they can borough is now cut down to half.

A client living in a city and earning 8,000 RON a month may now borrow a maximum of 100,000 Euro, repayable in 30 years, according to a calculation of a bank that has implemented the new norms. In the past, clients could loan a maximum of 180,000 Euro.

This decision was imposed by the National Bank of Romania in August this year. All major banks in Romania have applied or are in the process of applying these new regulations.

The new norms are favorable for those living in the cities and with a large income. Also, if a client has worked with the bank before the loan, he is in a better position than a newcomer. The relation between the client and the bank plays an important part in the new regulations.

Ialomita and Teleorman counties have the highest loan deliquency rate in Romania. These 2 counties are also the weakest regions in terms of economy. 3% of overall contracted loans in these areas are not being payed. In the rest of the country, this rate is of 1.1%, according to the National Bank of Romania.

Bucharest, which has the most numerous loans, has a comfortable position in terms of instalment payment, at the bottom of the ranking of counties with delinquent loans, with a rate of 0.93% of loan delinquencies in overall contracted loans. Analysts say customers’ overdue payments to banks must not be regarded in absolute volume, but as a share of loans granted, and that the average 1% for bad loans is not a threat, as it is much lower than in other countries in the region. (source: www.zf.ro)