In Romania, many consumers are at risk of being directly impacted by the global economic downturn. Households are increasingly under pressure, not only due to the sanitary impacts of the coronavirus crisis, but also because of its financial implications.
While public service workers are enjoying paid leave or only slight decreases in salary, private company employees are losing their jobs and going into technical unemployment, leaving them with no source of income during a period when a stable income is vital.
Under these circumstances, the Romanian government has implemented certain measures: furlough payments have been made, interest on loans for SMEs has been guaranteed or subsidised, and part of the expenses of parents forced to stay at home have been met.
Deferral of Loan Payments
GEO 37/2020 instituting a Moratorium of up to 9 months, available to virtually any type of borrower affected directly or indirectly by the COVID19 context (except for credit institutions), who do not register overdue payments/whose loan is not accelerated.
GEO 37/2020 sets forth that the payment obligation for the principal installments, accrued interest and charges under the loans are suspended at the request of the debtors, for a period of up to nine months, but no later than 31 December 2020.
In case of the debtors for whom the extension of the credit maturity exceeds the age limit provided in the lenders' rules, the latter shall proceed to restructure the loans with the observance of the age limit. This provision could expose the older consumers to over indebtedness.
Another cause of risks for consumers is that the GEO 37/2020 provides interest capitalization except for mortgage loans. The interest for the amounts due whose payment is suspended is capitalized and thus added to the credit (principal) balance at the end of the suspension period. Thus, the revised principal repayments are spread over until the new maturity of the loan following the suspension period. However, the interest is not capitalized in the case of the mortgage loans granted to individuals. In such case, the interest accrued during the suspension period is calculated according to the loan, and represents a standalone and independent receivable in relation to the other debtor obligations under the loan. This standalone and independent receivable bears no interest and its payment is spread over 60 equal monthly installments, starting the month immediately following the end of the suspension period and is guaranteed by the State.
In case of debtor default, subsequent execution of the guarantee and payment by the MFP, the Guarantee Fund prepares a debt instrument identifying the payment obligations of the individuals benefiting from the suspension measure. The debt instrument is a writ of execution. The relevant receivables resulting from the execution of the state guarantees under GEO 37/2020 are recovered from the debtors by the National Agency for Fiscal Administration and the collected amounts become state budget revenues. If a debtor fails to pay a receivables resulting from the execution of the guarantee letters on the due date, the debtor shall owe accessory tax liabilities calculated and communicated by the National Agency for Fiscal Administration.
For these reasons Asociatia Consumers United/ Consumatorii Uniti, calls to the Romanian authorities to make fully operational the insolvency commissions provided by Law no. 151/2015 on insolvency procedures applicable to individuals from the central and local level which at the moment do not work.
Prudential measures was taken
Romanian core principles – clarified by the National Bank of Romania Supervisory Committee clarifies the application of the prudential framework in COVID-19 context
Payment delays derived from a general legislative measure or based on direct negotiations with clients granted in the context of COVID-19 should not be automatically considered as being in financial distress.
Thus, loans should not be reclassified, and credit institutions should not set up provisions for loans, as a result of restructuring (such an operation is not considered a restructuring measure because it did not result from the borrower’s financial distress).
However, the operations where banks negotiate a payment delay measure, on an individual basis, which is not linked to the COVID-19 pandemic, should be classified as restructuring.
Since the banks built up capital buffers, the National Bank of Romania decided to allow the credit institutions to temporarily use these capital buffers up to a date that to be subsequently communicated, subject to complying with the relevant legal requirements.
Digitalisation
Although banks claim to have taken steps to increase the degree of digitization and introduce measures to limit physical contact with customers, in fact, for most operations banks in Romania require the personal physical presence of the consumer at the agency (card collection, personal data update). If the holder of the pandemic did not provide a proxy before the pandemic, the banks only accept original notarial power of attorney for representation of the holder. The vulnerable consumers, especially the old and the ones living in the remote rural areas of the country are affected by these practice. They also have difficulties in access to cash due to the movement restrictions and the low degree of banking in those areas.
The digital signature is not frequently used in Romania by individuals. It is spread mainly to the enterprises for business and fiscal purposes. As part of its response to the COVID-19 outbreak in Romania, the Romanian government has taken additional measures to reduce in-person interaction with public authorities. Under the Government Emergency Ordinance no. 38/2020 ("GEO 38/2020"), all Romanian public authorities are required to take necessary measures for accepting electronically signed documents from the public and issuing to that end electronically signed official documents. However, although the enactment of the above-mentioned government emergency ordinances is a good step forward towards digitalisation, we are still missing national implementation rules.
Following the global financial crisis of 2007, many countries have strengthened their institutional responses to over-indebtedness. Financial recovery measures by accessing the advice of financial advisers or resorting to personal insolvency have become available and accessible in several Member States. Rebalancing of budgets can be done through negotiations with creditors, as well, and the law of insolvency of individuals also exists in Romania.
It is important, however, that these emerging issues be addressed quickly inside the time buffer created by the moratoriums in various MS, the social protection to be coordinated in all Member States, in order to avoid deepening the negative consequences for national economies but also for society and to help consumers not to enter in financial distress and to avoid the increase in the volume of NPLs.
For this reason, Asociatia Consumers Uited/ Consumatorii Uniti calls on the EU institutions to not lose sight of consumers and citizens in this crisis. In Romania, around half of the households have already lost money due to the epidemic especially because the loss of professional income.