A new maximum loan granted to banks by the NBR

• Dragoş Cabat: Certain banks need liquidity, possibly the Greek ones

• Florin Cîţu: The NBR is adequately managing the liquidity in the banking system

• Daniel Ionescu: The shortage of liquidity in lei in the banking system needs to be considered in connection with the volume of government bonds auctions

The National Bank of Romania (NBR) yesterday lent to eight banks 8.077 billion lei (approximately 1.8 billion Euros), for seven days, through a repo auction, which represents the biggest amount since February 2010. At the time, the Central Bank lent 9.24 billion lei to 16 banks, through a repo operation.

On the previous operation, which happened last week, the NBR granted 7.94 billion lei (1.78 billion Euros) to nine banks.

Economic analyst Dragoş Cabat said that the increasing amounts which the NBR is offering through the REPO operations show that certain banks need liquidity, possibly the Greek ones.

On the other hand, economic analyst Florin Cîţu considers that the NBR is adequately managing the liquidity in the banking system and there is no issue in that regard. It would have been a problem if capital outflows had occurred, but this is not the case.

When it comes to yesterday's repo, Florin Cîţu said that the Central Bank provides liquidity to the banks, but that liquidity is not directed towards lending.

Economics Ph Daniel Ionescu considers that the repo operations of the NBR demonstrate that the unexpectedly low tax collection rate is endangering the financing of the public spending using the resources of the budget.

He said: "The regular interventions of the NBR through < repo > operations (which have come to amount to over 26 billion lei in the month of May!) are in my opinion, the result of the unexpectedly low tax collection rate, which is endangering the financing of the public spending from the budget (the inefficiency of the tax collection needs to be compensated for using other means!), a situation generated by the economic contraction after the restriction of consumption (the 25% wage cut for public sector workers), the increase in the tax arrears induced by the hike of the VAT from 19% to 24% and the gradual disappearance of thousands of companies (which leads to the excessive narrowing of the taxation base)".

Daniel Ionescu went on to say: "Even if the taking into custody the receivables from the portfolios of banks through the so-called < repo >operations shows that the Central Bank is the < lender of last resort >, the constancy of these operations and the fact that the < reverse-repo > operations (term buybacks) are not mentioned on the official website of the NBR could represent a cause for legitimate concerns (the structure of these operations is beginning to look like the one which the NBR was conducting in 2009!)".

Specifically, the lack of liquidity in lei displayed by the banking system must be viewed in connection with the volume of government securities auctions (discount treasury certificates and < benchmark > type bonds - public debt securities - have amounted to over 3.5 billion lei in May) which the Ministry of Finance assumes, and with a possible expansion of private loans denominated in lei (including as a source for refinancing of older loans which have reached maturity), according to him.

Economics PhD Daniel Ionescu also said that considering how unlikely it is that any pro-active steps to stimulate economic growth will be taken, the repo operations will continue!

"This is also proven by the fact that the execution of the state budget for the first four months is already seeing a deficit of 8.7 billion lei, for the most part caused by insufficient budget revenues!", he said.

In most of the previous auctions, three or four players participated, and the NBR injected 5 to 6 billion lei.

Through the repo operations, the NBR provides liquidity to the banks and receives government bonds in exchange, at the policy rate, of 5.25% year.

Yesterday, on the interbank market, the interest rates increased for overnight deposits. The yields displayed yesterday by lenders on attracted deposits (ROBID) for one day rose from 4.74% to 4.79%, and on placed deposits (ROBOR) the interest rate increased from 5.23% to 5.28%.

The Central Bank also grants banks loans in lei through Lombard operations. The only time banks resorted to this kind of operations was in April, for the first time this year, when they attracted short term loans of 14.5 billion lei (3.3 billion Euros), at a cost of 9.25%.