IN JULY, Banks borrowed 1.3 billion lei using the NBR"s Lombard lending facility

Overnight Lombard loans taken by banks from the NBR amounted to 1.3 billion lei, the largest number in the last four months, up 3.7 times over June, NBR data says.

"Lombard lending grew in July, on the back of diminished liquidity experienced by some lenders in the 21- 24 period of the month", says Rozalia Pal, senior economist at Unicredit Tiriac Bank. She explained: "Credit institutions have the entire month available to maintain the average of their reserves at 15%, for liabilities denominated in lei, and 30% for foreign currency denominated liabilities". In order to maintain their average required reserves, some banks sometimes resort to Lombard loans, in spite of its high cost, due to lack of short term financing alternatives, Mrs. Pal said.

The interest rate charged by the NBR for the Lombard loans was 13%, down 0.5% over May and June. Since the beginning of the year, the interest rate for Lombard loans decreased gradually from 14.25%. The deposit facility interest rate stood at 5% in June. In the case of deposits, the interest rate dropped 1.25% since the beginning of the year.

The amount of Lombard loans granted by the NBR to banks dropped abruptly these past few months, from 38.6 billion lei in February, to 16 billion in March and to just 139 million lei in April. In May, banks did not use the lending facility at all.

At the same time, the Central Bank continued to inject liquidity into the market through repo operations, with an average volume of 697.7 million lei in July, after the average daily volume stood at 748.4 million lei, in June.

Overnight deposits with the Central Bank amounted to 1.24 billion lei, down over May and June.

In July, the Central Bank began performing reverse repo operations, for sterilizing the cash surplus on the market, after it didn"t use this type of operation at all in June. Thus the daily average volume for this kind of transactions stood at 95 million lei last month.