New NBR rules on debt leverage for consumer and mortgage loans

The National Bank of Romania adopted the Regulation amending the Regulation no. 17/2012 on lending conditions. According to the new provisions, the maximum level of indebtedness will be 40% of the net income on loans in lei and 20% in foreign currency. The total indebtedness is determined as the weight of the total monthly payment obligations relative to the monthly net income. The maximum indebtedness rate is increased by 5 percentage points for the loans for the purchase of the first dwelling to be occupied by the debtor, "the BNR press release said.

The Central Bank representatives argue that they have made this decision for the following two reasons: simplifying access to credit for individuals and strengthening sustainable lending growth; protecting middle-income and lower-income people with a view to improving their ability to pay for healthy credit.
The regulation applies to both banking institutions and IFNs. Similar prudential measures have already been adopted in other EU countries and will enter into force as of 1 January 2019.

"All credit applications made prior to January 1, 2019, including those related to government programs addressed to individual clients such as First Home Program, are settled on the basis of the regulation at the time of application to the bank even if the credit is granted after January 1 2019, "the Central Bank representatives said.

Central Bank representatives also show that the average indebtedness at the individual level is the market average of 45% for consumer loans and 47% for mortgage. This level will be 40% in both cases, from 1 January 2019, and for the first dwelling will be 45%.

The  Financial Companies Association, ALB Romania, submitted in a press release the following statement: "The amendment to regulation 17 has long been announced; ALB participated in the consultation initiated by the NBR and expressed the point of view of the industry. As a general idea, I welcome the regulator's intention to take the necessary steps to encourage responsible and sustainable credit. We believe that the new mechanism adopted by the NBR ensures a linearity of the players' approach to the market and a simplification of the way consumers understand their maximum indebtedness. We appreciate the open approach of the NBR to discuss with the industry and the fact that some of our proposals have been taken into account. Given the public information that exists in the market as well as its own estimates of the NBR, we believe that there is likely to be an impact on the volume of new loans granted by the ALB members, which differ from one company to another according to the specificities of each and the degree of risk they were willing to assume. "