Lending market begins transition to maturity

At the same time, we have seen progress in automation and simplified analysis and loan granting processes in the personal loan segment. Even though the industry is still overly bureaucratic (strictly considering the paperwork involved, rather than its customer solvency analysis procedures), gaining access to the National Agency for Tax Administration’s (ANAF) database represents a major step forward in checking loan applicants’ income details. This hopefully represents an early sign of creating an IT system to govern customer solvency checks and loan granting processes.   
With a balanced market, small interest rates and large liquidity, with an increased demand for all loans, but mainly mortgage, confidence has gone up. However, the agenda has been dominated by controversies about new regulations and legislation. It should be noted, and, I believe, we should welcome the fact that for the first time in the “retail banking era” such measures are anticyclical, proving that the industry and the lending market have reached maturity (natural or controlled).    
The first new law to arrive was the mortgage walkaway law. Even though the new law was approved in the spring, we still saw a 68 per cent increase in solvable demand for standard mortgage loans, and a ten per cent hike in demand for personal loans in the first six months of the year.  
The increase was made possible by the delayed impact of the new the legislation on lending volumes. Banks needed time to adjust down payment requirements on housing loans and introduce new procedures. Their first impulse was to apply a significant across-the-board increase in down payments, which reached a ceiling of 35-40 per cent.
Later on, when customers started to call off their investment plans and loan demand took a significant dive, banks introduced new down payment requirements, based on various customer eligibility criteria and guarantees.  
Overall, central bank (BNR) data showed a 30 per cent annual increase in loan volumes for individuals in the first six months, compared to the same period of last year. Analysing the month of June, we saw a
1.2 per cent increase in the volume of loans for companies and individuals, compared to June 2015, to 217.6 billion lei. The June growth rate reported by banks was the lowest from the beginning of the year, and nearly half the growth level recorded in June 2015. Compared to May, the number of loans granted shrunk by 0.1 per cent.   
In the first quarter of 2016, potential customers started to worry about the stipulations in the then mortgage walkaway bill and rushed in to take loans against the clock. It almost seemed easier to get a loan approved than finding a property, when considering the persistently low new building offer and a relatively limited stock of old housing units.
Even though it may sound hard to believe, the first quarter of 2016 exceeded the mortgage demand recorded in 2008, seen as the peak for this market segment. Part of the growth was organic, but a large part of it was generated by the impending enforcement of the mortgage walkaway law, and subsequent restrictions on new loans.
The second quarter showed the first effects of the mortgage walkaway law, seen as the main factor behind the lending decline in June. At the same time, several banks came back with adjusted mortgage loan offers for solvent customers. 
Therefore, the public debates and controversies on the mortgage walkaway bill led to intense growth in mortgage loan demand in the first few months of the year, while the actual implementation of the law brought about two months of decline, followed by a recalibration of the offer, based on parameters (interest rates, down payment, solvency) that the market can absorb. To reach full maturity, the market has yet to learn how to slow down, so we don’t fly through the windshield every time that happens.
By the end of September, banks stabilized their mortgage down payment requirements and most of them settled for 25 per cent of loan value. The interest rates remained in line with both the real estate market and customers’ incomes. The reference interest rate is low and stable, and we can say that lending policies have taken in the effects of the mortgage walkaway law, which were negligible anyway, considering the commotion surrounding the topic and the alleged social “necessity” for such a law, claimed by its supporters. More new regulations came in the form of the Emergency Ordinance 52/2016, bringing domestic regulations in line with those included in the Directive 2014/17/EU on lending and consumer protection in the area of credit agreements.
Among other aspects, the ordinance addresses issues referring to pre- and post-contractual customer information, their rights for the duration of a mortgage contract, default protection and prevention measures, debt collection, contractual relations with third parties such as evaluators and insurers, and, last but not least, for the first time it validates and regulates the credit brokerage industry.
The spirit of the ordinance is in agreement with the potentially new post-crisis banking model: focus on consumers, humanised loans, protection and regulation. Civic and financial responsibility and maturity are key ingredients if we want to have a healthy banking, economic and social environment. 
Facing all sorts of hurdles, big and small, Romania’s lending market maturity process has entered its growth and evolution stage. It is up to us to keep the process going in the next few years before the big confrontation with the Generation Y model. Only then can we speak of a new banking model, which nobody seems to be worried about now. And all I can tell you is that I hope it doesn’t catch us off guard.