Wednesday, January 14, 2009

Romania says to assess lending rules impact

BUCHAREST, Jan 14 (Reuters) - Romania's central bank board will meet on Thursday to assess the impact of its regulations aimed at curbing fast credit growth and to see whether new conditions are needed to boost economic growth, a bank official said.

Analysts said Romania needs to prevent private lending from falling sharply if it wants not to harm its economic growth prospects, as economy is seen slowing down towards around 3 percent from an expected 8-9 percent in 2008.

"The central bank will assess the issue of lending, to see whether there is a need for measures or changes to boost lending," Adrian Vasilescu, an adviser to central bank governor Mugur Isarescu told The Money Channel television on Wednesday.

Last year, the bank unveiled harsher lending rules, meant to limit unsustainably fast borrowing, particularly in hard currency, seen as a key threat to long-term stability.

With the escalation of the cash squeeze, Romania is seen as one of emerging Europe's most vulnerable economies due to its vast external shortfall and high rate of foreign borrowing.

The fear is the Romanian economy could be destabilised if global cash flows and foreign investment dry up and are no longer sufficient to plug the double-digit external deficit.

Local media have cited various banking sources in recent days saying the central bank could potentially consider softer regulations for mortgage lending.

First deputy governor Florin Georgescu said late last year Romania could discuss potential easing lending rules for individual borrowers in January, as data had shown private credit falling for the first time in three years in October.

Private lending rose mildly by 1.1 percent on the month in November after a 0.6 percent fall a month earlier and compared to a 5.8 percent increase in Nov. 2007. Lending was still up 38 percent year-on-year in November.

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