Lending to non-government in Romania continued to lose momentum in Q3, when the stock of loans contracted by 3.3% y/y to RON 223bn [EUR 50bn] at end-September, the central bank reported.

Loans to non-financial corporations decreased even steeper – by 4.4% y/y to RON 116.4bn at end-Sep. Credit to households was down 2.3% y/y to RON 103.8bn even though the stock of mortgage loans rose by 8.5% y/y driven by state guarantees to young families buying a house.

At end-June, the central bank announced a 1.3% y/y contraction for the total stock of loans, while at the end of 2012 loans were still rising by 1.3% y/y.

Figures are slightly different for loans expressed in euro, but the pattern is pretty much the same. Non-government loans were down 1.8% y/y at the end of September – compared to a negative 1.5% y/y performance at end-Jun and a negative 1.2% performance in 2012.

In 2010 and 2011, the stock of loans increased at single-digit moderate rates [in both local and foreign currency]. Financing rather stagnated in 2012 and is currently losing momentum. Resuming financial intermediation is mentioned by the central bank as one key challenge for the country’s financial system in the near term while the regional deleveraging is a key treat.

The stock of loans recovered in 2010 and 2011 after the credit crunch in 2008/2009, as banks made the best use of their funds kept in the country under the Vienna Agreement. As the Agreement expired and banks had placed all their resources, there was no need for further financing. The rise in domestic deposits made possible foreign financial groups to substitute foreign financing from parent groups and thus withdraw their funds from Romania.