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Romanian Revolution against… the banks!

Romania is a new EU member (since 2007). Because of the lack of legislation, and when it was crystal clear that Romania would become an EU member (sometime in the years 2002-2003), a lot of banks came into this country and started lending money backed by a lot of doubtful practices. For example, nowadays the EURIBOR (Euro Interbank Offered Rate) is ~0.9% and many credit contracts signed in the good years (2005-2008) stated that the interest rates are variable, function of EURIBOR. Well, the reality is that these contracts contained also a lot of small prints, such as:

…but the bank can change the interest rate and commissions at any time…
…the bank can change the list of commissions…

Unfortunately the Romanian population had a zero degree of banking education. During the communist regime there were few banks in this country and money lending was a strictly regulated activity. When a worker wanted to borrow money, he was going to CAR or CEC and the rates were automatically taken from his monthly wage. Everything was “mechanized” because all the economy was centralized, so even if somebody was moving with the job in another town, the CEC bank knew that and automatically asked his new employer to pay the debt. There was no competition on the credit market, and if someone knew that he must pay 3% interest rate, this 3% was really equal with 3%.

Then, during the ’90s, Romania experienced a very high inflation and even if some private banks started to appear, nobody was taken money (except the State) because the interest rates were huge (40-50%). Thus, the credit market started to develop only after 2003, when the inflation was under control, the economy started to experience some very nice growth rates (6-7% y-o-y) and, due to the international context (country’s access to NATO and EU), foreign banks began to flourish.

So, many people started to borrow money from the foreign banks that opened branches all over Romania. These banks are, in vast majority, Greek, Austrian and French banks, but there are also banks from Holland, UK and Hungary. The demand for credits was so huge that the banks were lending money without even show to the clients a money lending agreement. The clients could access the agreement only after they signed the papers – and, of course, nobody really bothered to read the agreements! The credit frenzy was so huge that today Romania has only 4,3 millions employees and more than 5 millions credit agreements!

But little by little, step by step, the world financial crisis started to spread in Romania and more and more families had difficulties in paying back the rates. And people started to ask why, if EURIBOR is so low (under 1%), the banks doesn’t cut the variable interest rates?! And they discovered the small prints from above. Yes, your interest rate is variable, but me, THE BANK, decide … how much :) Yes, we reduced the “risk commission” with 0.15%, but from the next month you will pay a “blue sky color commission worth of 0.25%” :) … and so on!

So, people started to loss the cars and the houses (by the way, if you are in Europe and want to buy a cheap car, come to Romania!). And everything was 100% legal. People have signed the agreements, nobody pushed them to do so. But those who didn’t want to accept such a humiliating situation, began to organise themselves into anti-banks groups. On the other hand the Goverment (who is dependent from IMF and banks’ money) was forced by the foreign banks to delay the enforcement of the Personal Bankruptcy Act because the bankers were, and still are, afraid that, with such a law, a lot of Romanians would say: “F… you!” and abandon the house, the car, whatever they bought. But, between Scyla and Charibda, the Government was forced however to implement recently an European act that calls for more transparent banking services. This act gives more rights to the clients. This was enough for a lot of clients to organise themselves in huge, really huge groups, and to attack in justice the agreements signed with the banks. For example, the anti-Volksbank online group already has 1700 members and they have hired together a lawyer (a very good one) that will take the case to the justice. The anti-BCR-Erste group has 700 members. The anti-ING group has 250 members. And so on. Other groups are still small, but people are beginning to gather and to react because they heard from the newspapers that the anti-Volksbanks have managed to hire a lawyer. In total, thousands of angry Romanians have adhered to a group or another, but their number is growing day after day at a fast pace.

Anyway, this is very interesting because I think that this is the first time in recent history when a large mass of consumers is fighting so organised against the banking system. We have seen here and there throughout Europe some anti-banks movements in late years, especially in Greece, but they were rather random and anarchic. Will Romanians start a Revolution against … the banks?

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