Over 45% of corporate credit in Romania consists of cross-border debts within the same corporate group.
In a notable shift, Romanian companies have been increasingly turning to their foreign parent groups for loans, according to data from the National Bank of Romania (BNR) reported by Cursdeguvernare.ro. This trend, which began between 2020 and 2024, has seen the share of intra-group foreign loans in the financial debt of the non-financial corporate sector rise to 44%.
The growth of intra-group loans outpaced the overall financial debt growth of companies, with an annual rate of 10.5% in 2024, compared to 8.9% for companies as a whole. This indicates that borrowing within multinational groups is becoming a more significant source of funding.
Several factors are contributing to this shift. Faster growth of intra-group loans, potential cost and flexibility advantages, and a cautious domestic banking environment are all driving Romanian companies to seek funding from their foreign parent groups.
Local banks continue to finance companies through bonds and loans, as evidenced by recent strong bond issuances in the Romanian capital market. However, the rapid rise of intra-group loans means that nearly half of corporate credit is now external and intra-group rather than local bank-originated.
The reasons for the shift towards intra-group loans are multifaceted. The faster growth of intra-group loans suggests that these loans are becoming a more attractive funding option for companies. Potential cost and flexibility advantages, such as lower interest rates or more flexible repayment conditions, may also make intra-group loans more appealing compared to local bank loans.
Moreover, the economic and financial environment in Romania may be playing a role. Local banks may be imposing stricter credit conditions or higher costs, especially amid Romania’s challenging economic outlook, fiscal imbalances, and subdued growth forecasts for 2025. This could make intra-group financing more attractive to companies.
In summary, the trend of Romanian companies borrowing more frequently from their foreign parent groups rather than local banks is driven by faster growth, potentially more favorable terms, and a cautious domestic banking environment. This shift has led to intra-group foreign loans constituting nearly half of corporate credit, outpacing borrowing from local banks. The data on this trend is provided by the National Bank of Romania (BNR) and indicates that external parent-daughter loans are an important component of indebtedness.
- In the corporate sector, the shift toward borrowing from foreign parent groups, as opposed to local banks, can be attributed to factors such as faster loan growth, potential cost and flexibility advantages, and a cautious domestic banking environment.
- As a result of this trend, intra-group foreign loans now account for almost half of the corporate credit in Romania, outpacing the borrowing from local banks, demonstrating their importance as a significant funding source for Romanian businesses.
