Romania Ctrl Bk: Banks Will Seek Additional Guarantees After Personal Insolvency Law Adoption

Vasilescu said the central bank has already notified the Parliament on its objections to the personal bankruptcy bill.

"Such a normative act might discourage the (lending) process and the banks might look for more guarantees before giving a loan," Vasilescu told MEDIAFAX.

He said the central bank was asked for its opinion on the bill, as regulator and supervisor of the local banking sector, and its unfavorable point of view has been sent to the Parliament.

Romanian senators enacted Tuesday a legislative proposal on the insolvency of individuals, which states that the insolvency procedure aims to cover debts against the loan contractor, adding that, in case of personal bankruptcy, the assets of the loan contractor will be liquidated in view of covering the debt.

According to the draft law, the contractor who willingly requested and accepted the initiation of insolvency procedures can be completely or partially relieved of debts registered before or after the initiation of the procedure, if the contractor's assets are insufficient to pay the entire debt and if the court grants the contractor the benefit of veniality.

Moreover, the Romanian Banking Association ARB notified the Parliament that it opposes the adoption of this law as it may induce a supplementary risk into the banking system, especially in a period of economic crisis.

The adoption of the individuals' insolvency law represents an additional risk for banks and will increase household lending costs, especially for mortgage loans, according to ARB's vice-president Steven van Groningen.

Van Groningen said the law will force the banks to increase their interests for the retail loans, especially for the mortgage loans, in order to cover the refinancing risk.

The bill is pending debates in the Chamber of Deputies, which is the decisional chamber.

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