Overdue payments on loans taken out by individuals have exceeded the equivalent of 100 million euros in October. This is a first, the Credit Bureau's data shows.
A year ago, overdue loans amounted to 42.4 million euros, 1.5 times lower.
"We now have 290,000 debtors that have fallen behind with their payments. Out of these, 240,000 have overdue loans taken from one lender, while the rest were reported by several participants to the system," says Serban Epure, the general manager of the Credit Bureau. The database of the Credit Bureau currently holds data about approximately 2 million people, almost half of whom have black marks under their name, due to overdue payments on loans or breaking conditions set by their lender.
Individuals' overdue debts went up 7% in October, to the equivalent of 373 million RON. Most of the overdue debt comes from loans taken out in domestic currency, 341 million RON (the equivalent of 97 million euros). Overdue payments on loans in euros amount to 8.4 million euros.
The numbers of individuals that have fallen behind in their debt repayments has increased almost twice as fast as loans taken over the past year. According to the latest NBR data, loans withdrawn by the population had increased 88% (calculated in euros) in September this year against September last year.
The basis for comparison in terms of overdue payments on loans, however, is much smaller, which makes the growth pace seem higher.
In euros, credit taken out by individuals has increased from 5.3 billion euros in September last year, to a little more than 10 billion euros at the end of the third quarter of 2006.
The faster-paced growth of overdue debt shows that the rapid expansion of lending came with a cost, deteriorating the quality of the portfolio. However, there is a reason for the explosion in lending, as banks, in their race to gain as much market share as possible, found themselves forced to approach clients in a less than sound financial position. Although higher, the share of the overdue debt in the total volume of loans contracted remains at a comfortable level, of less than 1%.
Even though overdue payments are not yet causing trouble for banks, they are giving insurers a headache. According to the NBR regulations, the insurance policies for cases of default are considered real guarantees and are used by banks to leave room for "no advance money, no collateral" loans. Although credit insurance has seemed quite an attractive business for insurers, they are now being faced with a high rate of claims, since they have to repay the loan for the debtor, from whom they are to collect the money later.
Asiban, which has recently been placed in financial recovery by the Insurance Supervision Commission, was destabilised precisely because the number of claims settled rose by 80% to 48 million euros from September 2005 through to September 2006. Asiban had been one of the top vendors of loan and guarantee insurance policies for banks and has become a major player on the auto insurance market over the past year.
