The Ability Of The Population To Pay Their Bank Installments, Deteriorating

The ability of the population to pay their installments at the banks registered a slight deterioration, according to the Stability Report, published on Wednesday by the National Bank of Romania (BNR). “This evolution was manifested against the background of the increase in monthly rates as a result of the increase in interest only partially counterbalanced by salary increases”, the Report states.   The central bank also says that loans in foreign currency have a rate of non-performing loans twice as high as that recorded in the case of loans in lei.   A distinct category of borrowers is subject to closer monitoring, meaning those who postponed the payment of installments based on the moratoriums introduced as a result of the outbreak of the COVID-19 pandemic. “It has been proven that these debtors encounter difficulties in terms of honoring the debt service after the moratoriums expire and record a rate of non-performing loans almost 5 times higher, and the volume of non-performing loans related to this category of debtors represents about 14 percent of the total non-performing exposures , although, compared to the total, these credits represent only 4 percent”, the Report states.   The debtors who have postponed the payment of installments based on the moratoriums fall into the category of the riskiest debtors, having an average level of indebtedness at the time of granting well above the prudential limit, i.e. around 57 percent.   Vulnerable debtors, defined as those debtors with a debt-to-equity ratio of over 45 percent, register the highest proportion in the case of secured consumer loans (42 percent) and First Home/New Home loans (41 percent, September 2023).   On the one hand, the ability of borrowers to recover financially among those who recorded delays of more than 90 days in paying installments a year ago (September 2022), has deteriorated in the recent period.    Only 3.5 percent of loans more than 90 days in arrears in September 2022 returned to paying installments in less than 3 months, down from 2019, while 83 percent of them remained in the category of non-performance (with delays of more than 90 days).    For the next 12 months, a slight increase in the probability of default is estimated, both for mortgage loans and in the case of consumer loans.