BNR keeps key rate at 10%, cuts reserve requirements for foreign currency liabilities

The Romanian central bank (BNR) board decided today to keep the main rate at 10 percent per year in line with analysts’ estimates and reduce long-term required reserve ratio for foreign currency liabilities to zero, NewsIn informs.
Analysts NewsIn interviewed expected the hold of the main rate to 10 percent and mentioned BNR could operate changes to the way the minimum reserves are calculated.

However, bankers deem that there is still a long way to go to unclog lending and the state should take some measures in that direction too. Lending blocked for two reasons. On one hand it was the economic and financial downturn which hit markets worldwide, including Romania, drying up liquidities, and on the other hand, it was the new set of rules drafted by the central bank with the intent to limit lending risks. The new norms were applied since October last year and raised the indebtedness level. Still, at the beginning of the year, BNR agreed to lower the level to help banks move in the market swamp.

Minimum mandatory reserves of lenders were kept at 18 percent for leu-currency liabilities and 40 percent for those in foreign currency, the highest level in the European Union.

A cut in reserves, long-awaited and desired in the market, would be offset by the money borrowed from the International Monetary Fund and other international lenders. The first installment of the 20-billion euro loan will arrive in Romania after the accord is approved by the Fund’s board in the upcoming weeks.

The decision to slash the level of minimum mandatory reserves for foreign currency liabilities maturing in more than two years will enter into force starting with the period May 24- June 23, after the first 5 million euros from the IMF enter the country.

The reserves in foreign currency of lenders are included in Romania’s international reserves managed by the central bank.

The bank’s board also decided to keep a close eye on the proper management of liquidities in the banking system.

BNR governor Mugur Isarescu declared on March 26 it would be wise for the central bank to exclude long-term liabilities when calculating minimum mandatory reserves. Thus, by modifying the calculus base, the level of the reserves would also be reduced.

“This way we help the long-term financing as well, which will support lending, and we reduce the banks' discomfort of having short-term liabilities,” explained Isarescu.

The liabilities of banks stem from deposits of clients and from other types of financing which can be used to grant loans.

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