denominated in foreign currencies
In the years before the financial crisis, Romanian consumers took out loans denominated in foreign currencies (euro and Swiss francs) in large numbers. Foreign currency loans were marketed to consumers at lower interest rates than loans in the local currency (lei). 91% of Romania’s banking assets belong to foreign banks.
At the beginning of the financial crisis, the national currency substantially depreciated against the euro and the Swiss Franc, placing consumers with loans in these currencies in an extremely difficult position. In January 2015, consumer debt soared further due to the fact that the Swiss franc rose against the euro by more than 20%.
For a long time, the government did not intervene to protect consumers, saying instead it wanted the banks to come up with voluntary solutions negotiated with borrowers. In the end, in October 2016, theRomanian Parliament approved a law to help Swiss franc borrowers convert their mortgage loans into Romanian leu at historic rates. However, the Romanian government challenged the law in the Constitutional Court arguing that it “will take all necessary measures for the law to protect the people who actually cannot pay their loans, but not speculators.” In addition, in April 2016, the government approved a law that allows mortgage borrowers to wipe away their unpaid loans by returning their property to the bank.