BNR Alert: Beware of Mortgage Loans and Foreign Currency Loans

BNR raises the alert level: foreign currency lending and CRE in the spotlight The National Bank of Romania (BNR) raised the alert level in December regarding foreign currency lending and companies' payment discipline, introducing a distinct analysis of the risks generated by the commercial real estate (CRE) market at the National Committee for Macroprudential Oversight (CNSM) meeting. According to the CNSM statement from December 11, 2025, new risks and vulnerabilities to financial stability have been identified, which need to be closely monitored. In particular, both the reference to vulnerabilities generated by the commercial real estate market and the evolution of foreign currency lending to non-financial companies are noteworthy. A rare signal: risk analysis of euro lending presented in CNSM The mention of euro lending is notable because it represents the first time that, in a CNSM meeting (established in 2017), the General Council chaired by the BNR Governor, Mugur Isărescu, is presented with an analysis of the risks generated by euro lending. Generally, CNSM statements include technical references to risk indicators or capital buffers. This time, however, the BNR signal highlights two channels that can amplify shocks: foreign currency financing and exposure to the commercial real estate sector. Banks' exposure to CRE: 51% of loans to companies The BNR's financial stability report shows that the banking sector's exposure to the commercial real estate sector (CRE loans) represents 51% of the total loans granted to companies, according to data from September 2025. From this exposure, direct loans to the construction and real estate sectors amount to 42.3 billion lei, while indirect exposures (loans granted to companies but guaranteed with real estate properties) are higher, totaling 65.9 billion lei. Relative to total banking assets, exposure to the construction and real estate sectors represents approximately 20%, a level comparable to that observed in other countries in the region. Portfolio quality deteriorates: non-performance is above the system average BNR emphasizes that the CRE loan portfolio has a weaker quality than the aggregate portfolio of loans granted to firms and that there is a deterioration trend, similar to that observed at the economy level. As of September 2025, the non-performing loan rate in the commercial real estate sector was 5.7%, compared to 5.1% at the aggregate level. The distribution shows significant differences depending on the currency of the loan. CRE loans in euros have a non-performance rate of 4%, amid the ECB's interest rate cuts during the period June 2024 - June 2025. In contrast, CRE loans in lei record a much higher rate of 7.8%. Why the warning matters: contagion risk By explicitly including these topics on the CNSM agenda, BNR signals that risks from the commercial real estate sector and those related to foreign currency lending can become channels for transmitting shocks in the economy. In a stress scenario, the deterioration of CRE portfolios and companies' exposure to currency risk can affect the quality of banking assets, reduce the appetite for lending, and amplify financing tensions for the economy. The BNR's message is thus one of increased prudence: close monitoring, rigorous risk assessment, and avoiding the accumulation of vulnerabilities that can generate contagion effects.