Governmental loan drains 29 bln lei from banking market in 2009

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2009 was the year of the governmental credit on the banking market, the loan balance climbing 2.5-fold in 12 months, up to 46.8 billion lei (11 billion euros), whereas the total volume of population and corporate loans stagnated at some 200 billion lei (47 billion euros) Romania National Bank (BNR) data reveal.

The Govt loan balance advanced by 29.6 billion lei, namely the equivalent of 7 billion euros, but a great part of financing is on the short term and rolled over several times, Ziarul financiar daily reads. BNR brought its contribution to the massive state crediting, by lending the bankers so that they could acquire Govt securities.

The bankers say the prefer to finance the state that had to cover a 7.3 percent of the GDP budget deficit because the solvent loan demand from population and companies was drastically reduced and the risk associated to crediting the private sector rose a lot, given that the loan overdue payments tripled. At the same time, the state placements offer a higher security compared to private sector loans, plus higher profitability rates derived from Govt securities. The average profitability for Govt bonds hovered around 10 percent per year in 2009.

“The banks proved a raised appetite for Govt securities, given the high uncertainty degree related to private sector lending, the lack of eligible projects to be financed and high profitability of Govt securities. In fact, the banks were the main financing source for the budget deficit in 2009”, underlined Ionut Dumitru, Chief economist of Raiffeisen Bank in a bank report.
Corporate loan increased just 1.8 percent in Dec. compared to the corresponding month in 2008, up to 96.2 billion lei (22.8 billion euros) after two digit rises in the previous years.

Dropping company sales and lack of certainty on the evolution of the economy led to a reduction in their capacity to develop viable business projects based on which they could file for financing. As for the population a lower income and the raise of jobless rate from 4.4 percent in Dec. 2008 to 7.8 percent at last year-end have led to a stagnation of the loan balance at 100 million lei.

However, the analysts say that the orientation of bank resources to the state at the expense of the private sector is not necessarily a bad thing. “Expansion of the Govt credit has a positive impact upon the economy under conditions in which liquidity is on the rise on the market due to public spending”, pointed out the Raifeisen report.

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