THE CIRCUS OF THE NATIONAL BANK OF ROMANIA AROUND THE GIVING IN PAYMENT The NBR disavows the estimates of its own Financial Stability Director

Having come into effect almost a month ago, the Law of giving in payment continues to produce tensions, controversies, as well as hilarious situations, as officials of respectable institutions continue to contradict over its effects.

After the uncertainty on whether debtors would need to pay taxes on giving away their homes under the giving in payment procedure, contradictory statements over the number of notifications that the customers have sent to banks have appeared.

A major blunder, which would be funny if it weren't pathetic, was made yesterday by the National Bank of Romania itself, which distanced itself from the statements made by Eugen Rădulescu, the head of the NBR's Financial Stability department - according to whom about 4,000 notifications have been made so far -, and stated that those were his personal estimates.

In other words, Mr. Rădulescu should be praised for being the only one who succeeded in doing, using his "personal" tools, what banks, notaries and lawyers couldn't - estimate how many giving in payment requests have been made.

Congratulations, Mr. Eugen Rădulescu!

Congratulations for personally having what to make these measurements with and also congratulations for personally being in charge of making these estimates, because the Central bank doesn't have that in its job description, according to the response it sent us, through the Mass-media Division, the Communication Office.

The clarifications made yesterday by the NBR, after the conference in which Eugen Rădulescu spoke, are as follows: "The number of notifications sent to banks by customer based on the Law no. 77/2016 mentioned today, 08.06.2016, by Mr. Eugen Rădulescu represents his personal estimate. That data is not official data from the NBR.

It bears mentioning that according to the law, the NBR is not tasked with processing data about the notifications filed by debtors.

We also mention that the National Bank of Romania doesn't currently hold data concerning the extinguishment of the obligations undertaken through loans as a result of the application of the Law no. 77/2016".

Mr. Florin Dănescu, the executive chairman of the Romania Banking Association (ARB), said: "We do not have, we have not requested or received information about the giving in payment notifications. We have our own concerns. We hope that this law will not embolden far too much those who can pay, but no longer want to. Only the NBR has these statistics, which it monitors, but it is premature to make them public. We are carefully watching the communication of this issue, because we do not want to increase the risk, through our statements".

The head of the Financial Stability Department of the NBR yesterday said, in a seminar which was held at the Romanian Banking Institute (IBR): "Since 2013 we have reentered a positive trend, both when it comes to real estate assets, as well as net financial assets. I am afraid that 2016 will not continue that trend. I expect that in the second half of the year the value of real estate assets will continue to drop, if we are going to still have the Law of giving in payment in effect. The market will be depressed, it will go into a compression process, which will lead to the drop of the value of all the real estate assets. Not everyone is looking to sell their home right now, except there is a psychological factor that matters and which unfortunately will continue to manifest itself, meaning that we will notice that we are less rich because all the apartments and all of the real estate assets which we have aren't worth what they were. It won't be a significant compression. We anticipate that it will stop between 5-10%, but think that this means quite a lot compared to the total of the real estate assets. So far, the number of those who have asked to hand in the keys to their homes under the Law of giving in payment is about 4,000 people. 4,000 versus 10 million holders of real estate assets. This is the major achievement of this law".

According to Mr. Rădulescu, this legislative initiative will cost all of us dearly: "Someone may win some elections based on these things, assuming by the time the elections come around people don't wake up and realize they stand only to lose from this".

Romania will certainly see its sovereign rating downgraded, if another "wacky thing" like the law of giving in payment shows up, the head of the NBR said, and he went on to say: "A potential cut of the rating will put additional pressure on the borrowing cost. We are currently doing very good in that regard, because we have both a favorable international situation with high liquidity, as well as a favorable position in the eyes of investors, of the Romanian economy. If we get close to the 3% public deficit threshold this year, and we will, then that will mean a warning signal for investors and if measures to reverse that trend aren't taken immediately after the elections, then things may not look good at all. If we pass the 3% level in 2017, then we will do so by a lot, because the refinancing of the foreign debt will cost us a lot".

Romania has a BBB-/BBB rating, with a stable outlook, from Fitch, a Baa3 rating (investment grade) from Moody's and a BBB minus with a stable outlook from Standard & Poor's.