Changes to consumer loans emergency ordinance, among Romania's pledges to the IMF

Romania has pledged to make changes to the Emergency Ordinance 50/2010 in order to receive a new tranche of the loan from the International Monetary Fund (IMF), although local authorities have denied it in the past. “The ordinance will be amended before being adopted by parliament to either remove the retroactive component, or alternatively to allow banks full flexibility to adjust contractual terms on loan contracts entered into prior to the ordinance coming into effect so as to safeguard financial sector stability. In addition, we will ensure that the National Bank is the only agency authorized to regulate banks’ lending activity,” writes the recent review document published by the IMF, which includes Romania's letter of intent to the fund. Read the full IMF review of Romania's stand-by agreement here. Romanian authorities have previously said changes to the emergency ordinance were not required in order for the country to receive a new disbursement of the IMF loan. The Romanian Parliament approved changes to OUG 50/2010 at the end of last year, allowing banks to apply the ordinance norms only to new contracts. Applying it on existing loan contracts would have caused losses for banks. The European Commission has sent Romania a letter requesting information on Emergency Ordinance 50/2010 on consumer lending, which was a preliminary move before triggering infringement procedures. In October last year, the European Commission sent local authorities a letter requesting clarification on the way a European directive is transposed into Romanian legislation through Emergency Ordinance 50, after receiving multiple complaints on the transposition of Directive 84/2008 into local legislation. The Government Emergency Ordinance 50/2010 entails a more transparent bank interest calculation, linking the final interest to ROBOR or EURIBOR interbank rates, canceling the risk fee and, in case of loans with variable interest, canceling the reimbursement fee altogether. Consumers had expected a lowering of the interest rate – and consequently of their monthly installment, hoping banks would replace their internal interest rate with ROBOR/EURIBOR, while keeping the fixed margin at the same level. Banks have however kept the same interest level and changed the way it was calculated, which triggered the consumers’ discontent. Groups of unhappy customers have started lawsuits against banks like BCR and Volksbank on this issue, while banks lobbied for the ordinance to be changed. editor@romania-insider.com