The National Bank of Romania (NBR) raised the alert level in December regarding foreign currency lending and companies’ payment discipline, introducing in the meeting of the National Council for Macroprudential Supervision (NCMS), for the first time since March 2024, an analysis of the risks generated by the commercial real estate market (CRE).
The press release of the most recent NCMS meeting, of December 11, refers to new risks and vulnerabilities to financial stability that must be closely monitored by the National Bank. Among these, the mention of “vulnerabilities generated by the commercial real estate market” stands out, as well as “the evolution of foreign currency lending to non-financial companies”.
This is the first time in a meeting of the NCMS, established in 2017, that the General Council chaired by NBR Governor Mugur Isărescu is presented with an analysis regarding the risks generated by lending in euros.
Note: In general, NCMS press releases include dry references to risk indicators or, most often, to the “countercyclical capital buffer”. The new mentions make the NCMS meeting at the end of 2025 somewhat special. Of course, not as special as the one in December 2018, when the Ministry of Finance, then led by PSD and Eugen Teodorovici, presented the so-called “greed ordinance” – OUG 114/2018 – to the NCMS on Christmas Eve, that is, just a few days before it was adopted.
The interesting thing is that the evolution of euro lending and the risks arising from the commercial real estate (CRE) sector are analyzed separately and in detail in the financial stability report recently published by the National Bank of Romania (NBR).
1. Risks generated by the commercial real estate sector and corporate lending with mortgage guarantees. The deterioration began in September 2024, before the canceled presidential elections
According to the NBR report, the banking sector’s exposure to the commercial real estate sector (CRE loans) represents 51% of total loans granted to companies, according to data as of September 2025. Of these, direct exposures to the construction and real estate sectors amount to RON 42.3 billion, while indirect exposures (representing corporate loans secured by real estate properties) have an even higher value, totaling RON 65.9 billion.
Of total banking assets, exposure to the construction and real estate sectors represents 20%, similar to countries in the region, where CRE shares are relatively low (see graphs below).
The problem highlighted and analyzed by the NBR is the quality of the commercial real-estate (CRE) loan portfolio, which is weaker than that of the total loan portfolio granted to companies by banks. Moreover, there is a deterioration trend, similar to the general situation in the economy.
Overall, the non-performance rate in the commercial real estate sector is 5.7%, compared to the aggregate level 5.1% of September 2025, with the following distribution:
- CRE loans granted in euros record a lower non-performing loan rate of 4%, thanks to the ECB’s interest rate cut between June 2024 and June 2025
- compared to 7.8% in the case of non-performing loans granted in RON.
„The non-performing loan rate associated with companies in the construction and real estate sectors stands at 4.4% in September 2025, a relatively constant value in annual terms. In the case of indirect exposures (company loans secured by real estate properties – editor’s note), the non-performing loan rate records higher and increasing values, respectively 6.6% in September 2025, compared to 4.9% in the same period of the previous year,” the NBR shows.
95% of CRE loans are variable interest. Those in euros are vulnerable if the ECB raises interest rates again. How much is covered by guarantees
Depending on the type of interest rate, variable interest loans represent 95% of the entire CRE loan portfolio, with only 4% of the loan stock being granted with fixed interest from origination to maturity.
Currently, the rate of non-performing loans granted with variable interest rates throughout the contract period is lower than that of loans with fixed interest rates (5.7% compared to 6.8%), but this means that most CRE loans are exposed to the risk of increasing interest rates if inflation in the euro area picks up again, given that, by currency, only 41% of CRE loans in stock as of September 2025 were granted in RON.
At the same time, according to the NBR, a degree of coverage of over 100% of loans through guarantees (loan to value), which is a relevant indicator in assessing vulnerabilities from the real estate market, was recorded in September 2025 in only 35% of CRE loans, while 16% of loans had a degree of coverage between 80% and 100%.
Note: In the event of negative economic and financial developments, the value of collateral is affected by falling property prices, leading to increased capital requirements for banks and a restriction on their ability to grant credit.
The risk of contagion – 73% of investments in the Romanian commercial real estate market come from foreigners
The NBR also points out that the risk of contagion can also arise as a result of a strong external financial shock (such as after the 2009 financial crisis), due to the involvement of investors bringing capital from various countries (UK, Belgium, Hungary and the Middle East) in the commercial real estate market – foreign investors represent 73% of the total volume of investments in the Romanian commercial real estate market, in the first semester of 2025.
However, it should be said that companies operating in the construction and real estate sectors have a higher debt level compared to other sectors, with significant short-term debts, which implies an increased risk of refinancing and debt rollover.
Even so, the NBR points out that the liquidity position of companies with construction and real estate activities is satisfactory at present, similar to that at the economy level, although the term for recovering receivables and the payment period of suppliers are much longer.
Firms operating in the construction and real estate sectors represent 15% of all non-financial companies (approximately 132,000, at the end of 2024), employ 12% of the number of employees in the economy (approximately 484,000) and hold 21% of the assets of non-financial companies.
2. Dynamics of foreign currency lending to companies and deterioration of payment discipline
Regarding the monitoring of risks arising from lending in currencies other than RON, the NBR’s financial stability report shows that the average dynamics of foreign currency lending to companies in Romania was, in the last 3 years, the highest in the EU, of +12%.
Foreign currency credit also represents 49.1% of the entire loan portfolio granted by banks to non-financial companies (+4.4 percentage points vs. September 2024).
At the same time, according to NBR data, foreign currency lending at NFIs level represents an overwhelming proportion of the total stock of loans granted to non-financial companies, the total being RON 40 billion (+13% year on year). In September 2025, foreign currency loans represented 87.1 percent of the total loans granted by NFIs to non-financial companies.
It should be noted that 70% of NFIs are owned by banks (56% of NFIs by banks with foreign capital), which creates an important link between the quality of the NFI portfolio and banking risk.
„Although, at present, the risks associated with this interconnection remain at a low level, it is necessary to carefully monitor their evolution, in the context of the potential intensification of the links between the banking sector and NFIs, against the backdrop of the expansion of NFI activity and a high share of financing in foreign currency,” the NBR underlines.
Corporate foreign currency exposure remains high in banks’ portfolios and maintains a sustained growth rate – „Moderate” deterioration of the loan portfolio
The NBR comments in the report that, given the difficult economic context, with a rising fiscal burden and inflation, coupled with high nominal interest rates, the quality of the loan portfolio deteriorated „moderately”.
Here, the non-performing loan rate reached 5.2% at the end of September 2025 (up 1.3 percentage points in annual terms.
„The increase in non-performance is generated to a greater extent by the component of exposures with delays greater than 90 days, which had an increase of 50%, compared to a 33% increase in the case of exposures marked in the unlikely payment category,” explains the NBR.
According to NBR data, the non-performing loan rate began to increase in the economy from May 2024 and then especially from September 2024 (see above the graph of non-performing loan rate by currency), before the presidential elections later canceled in December.
But the central bank points out that „the credit risk associated with the foreign currency loan portfolio has not generated challenges for banks and NFIs to date.”
NBR: Currency risk is partially mitigated by the fact that 40% of foreign currency lending is intended for financing productive equipment
Nevertheless, it should be noted that the degree of hedging of foreign currency loans is at relatively low levels, both for banks and for NFIs – a fact that exposes the economy to major financial risks in the event of a significant depreciation of the RON against the euro. In Q1 2025, only 9.1% of total banking exposures in foreign currency were hedged against foreign currency risk.
However, NBR remarks that the currency risk is partially reduced by companies’ foreign exchange reserves (+8 pp to cover) and by the fact that foreign exchange loans go mainly towards productive investments (equipment), not towards current financing.
„In the event that developments regarding foreign currency lending to non-financial companies continue to indicate the accumulation of vulnerabilities to financial stability, there are several regulatory options within the scope of macroprudential policy, such as: (i) recalibrating the systemic risk buffer (SyRB) by introducing an additional criterion regarding foreign currency lending or (ii) introducing a sectoral systemic risk buffer (sSyRB) applied to non-governmental foreign currency lending,” the NBR also shows.Note: It should be noted that, according to NBR analyses, „banking sector liquidity and solvency levels are adequate” and „profitability allows for the maintenance of capital reserves”.
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