Loans could end up growing only as much as deposits, or even more slowly, given the volatility of the latter, which will therefore lead to shorter maturities, says Mihai Bogza, chairman of Bancpost's Board of Directors.
"We are already much more selective about granting loans than we used to be, because, on the one hand, we are trying to anticipate the economy's performance and, on the other, because we want to see how much flexibility we have to raise the price of loans so as to cover our higher costs. If we fail to include the new costs in prices, we will grant much fewer loans," Bogza says.
He notes that there is a significant gap on the market between the volume of loans and the volume of deposits, which is covered by funding from parent banks.
"Unless the resources available on the market increase, banks will only be able to grant loans depending on the trend of deposits, which will lead to a natural reduction in lending."
He says that Bancpost is trying to temper increases of the interest rates of existing loans, spreading raises over several months so as to make them bearable to the clients and offering the option of early repayment to those who have the necessary cash and feel they cannot afford the interest rate raises that could come until the end of the crisis.
"This is a reality: credit is becoming much more expensive than in previous years, because of two factors: the increase in risk margins an in the cost of sources. What is certain is that we will no longer see very high profit rates across the banking system as of 2009, because banks will inevitably share the costs with the clients. We at Bancpost are already looking into the opportunity of a substantial increase in risk reserves right now, so that the crisis will find us prepared when it comes. The nine-month financial results allow us to do this."
Under the circumstances, Bogza says the priority of banks and authorities is to ensure the conditions required for a normal lending flow.
"The risk for the economy has to do with a potential halt of lending, which could only cause a real crisis because it would drive output volumes down and generate unemployment, and a decline in consumer spending below normal levels, which in turn would lead to a new decline in production and so on and so forth, creating a dangerous spiral."
The banker believes that the elements that can allow lending to continue depend on a firm signal from the authorities that the no major imbalances will occur in the economy.
"Let's not delude ourselves: even though the direct effects of the international crisis on the real sector are marginal, this can still lead to higher risk margins and it is vital for banks to be able to incorporate them into the prices of loans."
As for the sovereign rating downgrade by S&P, Bogza feels it is just an excessive punishment, which, however, reveals that Romania's image problems are more serious than the real ones.
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