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Panaite, Adrian

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Capital - Romania | 01/06/2015

New law keeps Rumanian banks in check

The Romanian parliament passed a law on private bankruptcy in mid-May according to which insolvent individuals can free themselves from debt by transferring their mortgaged homes to banks. An important step for preventing real estate bubbles, the Bucharest business magazine Capital believes: "Greed can lead banks to overstate the value of guarantees so as to boost their loan business and artificially improve their balance sheets. They take advantage of the fact that every now and then a lunatic knocks on their door ready to plunge into debt. This should be prohibited, and for that reason the interest and currency risk should lie with borrowers while banks bear the guarantee risk. ... The impulse behind speculative bubbles comes from banks. Their tendency to abuse guileless customers must be countered. And nothing can do that better than the fear that they'll have to purchase overvalued real estate and then pay the difference from their own pockets."

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