As Foreign Financing Delayed, National Bank Board Convenes For Unscheduled Meeting

Without funding from the international financial institutions, without any chance to take loans from foreign markets and with domestic banks pressuring for higher interest rates, the National Bank of Romania has been forced to come once again to the Government"s rescue.

Although the Board of Directors of the National Bank of Romania (BNR) was not scheduled to meet again before 5 January 2010, "a special meeting" took place yesterday to adjust financing conditions in the Romanian banking system, according to a BNR press release.

"Given the delayed external inflows, ensuring a proper financing of the government sector borrowing needs from domestic market resources in the last part of 2009, while preserving the macroeconomic equilibria, requires adequate financing conditions in the Romanian banking system," the press release indicates.

Thus, the BNR Board of Directors has decided to lower the minimum reserve requirements ratio on foreign currency-denominated liabilities with residual maturities of up to two years to 25 per cent from 30 per cent starting with the maintenance period of 24 November - 23 December 2009.

Lucian Anghel, Chief Economist of Banca Comerciala Romana (the Romanian Commercial Bank, BCR), told BURSA that BNR"s decision would help finance the budget deficit, by ensuring better financing conditions, as well as ensure macro-stability. In his opinion, without such decision, financing the deficit would have caused functional problems in the economy.

"The problem is that the budget deficit is increasing continuously and will have to be reduced somehow, but we will only see steps in this respect next year," Anghel told BURSA.

The BNR Board decision aims also to gradually align the minimum reserve requirements ratios to European Central Bank standards, the press release further indicates.