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Bankers prefer to keep their money at the NBM rather than crediting the economy

2018.09.05 Economie Victor Ursu Print version

Lending to the economy continues to be in recession, even if interest rates on loans are very low. The balance of credits to the economy at the end of June 2018 was lower than the level recorded at the end of June 2017 by 2.8%, amounting to 37.5 billion lei. Banks prefer to keep money in the CBN or place them in the SS. It is the opinion expressed by the journalist Victor Ursu in the framework of the show "15 minutes of economic realism".

Thus, the balance of credits in foreign currency decreased by 4.4% (an important factor is the appreciation of the national currency, which influences their value recalculated in lei), while those in national currency decreased by 1.7%. Another reason that explains the decrease in the balance of credits is the reluctance on the part of banks to provide loans, given the high reserve requirements and their profitability. However, the deceleration in the balance of credits is slowing.

According to the latest NBM data, the largest share - 27% - is in the credits for trade, then 14% were destined for consumption, 9.3% - loans for the purchase/construction of the building, 8.7% - credits to the food industry, etc. Within these loans, the most pronounced increase was recorded for loans granted for the purchase/construction of real estate, the volume of which increased by 16.5% (MDL 434 million) from the beginning of the year, which is explained, March 26, 2018, of the "First House" project.

Foreign currency loans, expressed in USD, grew by 4.5% in the second quarter of 2018. The balance of ROL loans decreased by 2.0% during the second quarter of 2018. At the same time, we can already talk about a positive trend in lending, which was marked by the increase in the volume of new credits granted during the year. II.

Starting with 2016, interest pressures have moderated, but economic and consumer access to funding is still difficult. Banks have become more cautious in lending on the backdrop of tightening banking legislation.

In June 2018, the volume of new credits in national currency was higher by 11.8% compared to June 2017. Similarly, the volume of new loans in foreign currency was 13% higher.

At the same time, excessive liquidity in the banking system creates a potential risk of financial instability in the national economy. Given the low demand for loans from economic agents and unfavorable circumstances (the share of nonperforming loans accounted for 14.7% in June 2018), banks' reluctance to accept the high level of risk accompanying lending operations will increase. This increases banks' demand for financial operations with a low level of risk and sufficient profitability, such as placements in the SS and CBN, immediately with the increase in excess liquidity.

In conclusion, Victor Ursu said that a revival in business lending will result from a qualitative economic growth. What we currently have is just stimulating trade mainly imports.

The show is made in partnership with Radio Free Europe

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