“No need to worry about loans in lei. Banks have to do something with the money, the networks they hold must function”, said Isarescu, adding that the banks focused on lending in foreign currency would be forced to push the brakes of lending, but not to hard, “so they don’t get their heads thrust into the windshield”.
National Bank of Romania (BNR) will allow liquidities in lei from the banks’ required reserves to stream into the market when they will be directed to credits in lei and when the regulator will signal a clear trend of shrinkage of lending in foreign currency, said Mugur Isarescu.
“We will allow liquidities in lei to stream into the market. We will decide this after an analysis of the board, when it will match with the strategic idea that additional liquidity in the banks’ reserves to be directed towards loans in lei, when lending in foreign currency has a clear shrinkage trend” said Isarescu, mentioning that this kind of measures will be able to cushion Romania from the impact of international crisis.
The governor explained the decision to cut the required reserve ratio for leucurrency liabilities of commercial banks saying that in the past two months, central bank went from the role of debtor to net creditor of the banking system.
“We recovered, after 7-8 months to a normal state, and it is a signal we have been triggering for 5-6 months. I remind you there is a technical relativity”, Isarescu added.
On Thursday, BNR decided to cut the required reserve ratio for leucurrency liabilities of commercial banks from 20% to 18% and maintained the level of 40% for liabilities in foreign currency, in an effort to improve liquidity management in the inter-bank market, in the context of snowballing turmoil on international financial market, and to ensure a sustainable funding of economy.
The impact of the Thursday’s decision would be a release of 2 billion lei, which will lead to diminishing pressures in the monetary market, analysts say, as the interests mounted to even 100% in the last few weeks.
The governor said that in Romanian market there is no generalized liquidity shortage, as all banks set their required reserve ratios on October 24.
Currently, BNR absorbs 20% of the funding resources in leucurrency liabilities of the banks and 40% for liabilities in foreign currency in the so-called required reserve ratios that each commercial bank must hold.
On Thursday, the banking regulator cut the required reserve ratio for leucurrency liabilities down to 18%, but the decision will be effective as of November 24 – December 23, 2008.
Translated by Camelia Oancea
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