The NBR Board has adopted today, 17 October 2018, the Regulation amending and supplementing NBR Regulation No. 17/2012 on certain lending conditions, as subsequently amended and supplemented. According to the new provisions, the maximum level of indebtedness shall be 40 percent of the net income for leu-denominated loans and 20 percent for foreign currency loans. The total level of indebtedness is measured as a ratio of monthly debt service to the monthly net income. The maximum level of indebtedness shall be raised by 5 percentage points on first-time home buyer loans for borrower-occupied dwellings. The Regulation shall apply to banks and NBFIs alike.
Similar prudential measures have already been adopted in Hungary, Poland, Estonia, Lithuania, and the Czech Republic.
Which are the key objectives in amending the Regulation?
- Simplifying household access to credit and consolidating the sustainable growth in lending. According to the new methodology, any loan applicant can easily determine both the loan amount and the related instalments.
- Safeguarding average and below-average income earners by improving their payment capacity in order to support sound lending.
What are the main changes in the Regulation?
Simplification: any potential borrower can calculate the maximum amount of their potential monthly instalments due to banks and NBFIs
| Calculation methodology up to 31 December 2018
| Calculation methodology as of 1 January 2019
|
| Net income
| Net income
|
| Minus subsistence expenses
| NO longer applicable
|
| Minus other income adjustments
| NO longer applicable
|
| Minus adjustments for shocks on exchange rate, interest rate, disposable income
| NO longer applicable
|
| Maximum level of indebtedness: variable across banks
| Maximum level of indebtedness: 40% for oans in lei, 20% for foreign currency loans |
Facilities for the sustainable growth of lending to households:
- softer rules on first-time home buyer loans for borrower-occupied dwellings;
- non-applicability of the limit on the level of indebtedness for maximum 15% of each creditor’s portfolio of new loans to households;
- reduction in banking bureaucracy when loans are granted.
What will happen with the loan applications filed, but not yet completed?
All loan requests filed prior to 1 January 2019, including those covered by government programmes for households, such as the “First Home” programme, are processed based on the regulation in force when submitting the application to the bank, even though the loan is granted after 1 January 2019.
Will refinancing still be possible?
The loans granted exclusively for the repayment of loans taken before the entry into force of the Regulation are exempted from the new requirements on the level of indebtedness.
However, this does not apply to the refinancing implying also the granting of a loan in addition to the existing one(s).
When does the new Regulation come into force?
The Regulation amendments will be published in Monitorul Oficial al României and become effective starting 1 January 2019.
What will be the estimated impact of the new Regulation?
- Insignificant impact on economic growth;
- Estimated impact on debtors’ maximum instalments (example):
|
| Maximum monthly instalment (lei)
|
| Up to 31 December 2018
| As of 1 January 2019
|
| Individual earning net income of lei 3,000
| 1,413
| 1,200
|
| Household comprising two adults and two children, with total monthly net income of lei 5,000 (around the national average)
| 1,996
| 2,000 |
Individual indebtedness level (percent)
|
| Up to 31 December 2018
| As of 1 January 2019
|
| Housing loans
| 47% (market average)
| 40% (45% for the first home)
|
| Consumer loans
| 45% (market average)
| 40% |