NBR restricts debt-to-income ratio for loans - KPMG Romania
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NBR restricts debt-to-income ratio for loans from 1 January 2019

NBR restricts debt-to-income ratio for loans

Starting from 1 January 2019, lenders must comply with the provisions of the new NBR Regulation no. 6/2018 amending and supplementing Regulation no. 17/2012 on certain conditions for the granting of credit, which state that the maximum debt-to-income (DTI) ratio will be 40% of net income for loans in lei and 20% for those in foreign currency.

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Legal framework

The new Regulation amends and supplements NBR Regulation no. 17/2012, the main change being the imposition of a maximum DTI ratio for borrowers who have contracted a loan from a credit institution or a non-banking financial institution (IFN). Art. 12 of Regulation no. 17/2012, the existing norm, states that lenders should set the maximum allowable DTI levels through internal rules. The new Regulation standardises the maximum DTI ratio by withdrawing the freedom of lenders to set the maximum rate. Currently, the average rate on the market is 47% for mortgages and 45% for consumer credit, according to a press release issued by the NBR.

The new Regulation states that the maximum DTI rate is 40% for consumer credit and many mortgages. However, the rate is 45% for mortgages whose objective is the purchase of a first dwelling which is to be occupied by the debtor. The maximum rate for foreign currency loans is 20%.

The new Regulation introduces exceptions to the maximum DTI ratios prescribed. Lenders may exceed the maximum ratio for newly-granted consumer credit in every quarter, subject to a maximum of 15% of the volume of the consumer credit granted by the lender in the previous quarter. Additionally, lenders may exceed the ratio for credit for immovable property investments newly-granted in every quarter, subject to a maximum of 15% of the volume of the credit for immovable property investments granted by the lender in the previous quarter. However, these exceptions do not apply in the case of credit whose value exceeds 250.000 euros. Lenders must report quarterly to the NBR on the volume of newly-granted credit, using the form in the annex to the new Regulation.

How is the DTI ratio calculated?

The DTI ratio is calculated as the value of total monthly payment obligations relative to the debtor’s monthly net income.

Entry into force

On 9 November 2018, the amendments to NBR Regulation no. 17/2012 were published in the Official Journal of Romania and entered into force. Lenders must comply with the provisions of the new Regulation from 1 January 2019.

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