The weighted average effective lending interest rate on newly-extended loans fell 0.8pps y/y to 10.33% in July due to retreating rates on both corporate and retail loans, central bank data showed. In monthly terms, July’s borrowing costs stagnated after shrinking 0.4pps in June.
Effective interest rates on new retail loans fell 0.10pps y/y to 11.85% in July due to falling borrowing costs on cash and housing loans. In monthly terms, however, rates on household loans went up 0.60pps.
Rates on corporate loans dropped 0.83pps y/y and 1.12pps m/m to 9.17% due to falling rates on liquidity loans.
The decline of the value of newly-extended loans narrowed to 1.4% y/y to EUR 57.2mn in July from a 13.9% y/y contraction the month before, due to a slower drop in corporate loans. New retail loans have been increasing in y/y terms since the start of the year. Falling corporate lending likely reflects high borrowing costs and cautious banks attitude towards rising NPLs (at around 20% as of end-May).
In November 2012, the CBCG introduced a ceiling on the effective interest rate on new corporate (at 14%) and household (at 15%) loans, seeking to curb excessive lending rates and rising non-performing loans. The CBCG is also working on enhancing the framework for non-performing loan (NPL) workout, in cooperation with the World Bank. In September 2013, the CBCG will launch an assessment of the restructurable portfolio in the four banks with the biggest portion of loans that could be restructured (B and C classified loans for consumers with less than optimal credit histories) on the banking sector level. The assessment aims to help banks prepare their own plans for NPL resolution through restructuring, the World Bank’s country office told IntelliNews, without providing details on the banks in question.
The value of newly-extended loans shrank 6.3% y/y to EUR 400mn in January-July following a 7.1% decline in January-June.
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