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CEC Bank president: Cut in reserve requirement and key interest rate, a possible boost to economy

The cut in the bank reserve requirement and the monetary policy interest would give Romanian economy yet another boost, providing a cheaper cash surplus on the market, Romanian Banks Association and CEC Bank president Radu Gratian Ghetea told a seminar on banking market issues.

'A cut in the minimum reserves and the reduction of the key interest would give the Romanian economy a new boost by generating a surplus of cheap money that could be directed towards immediate lending. If you look to back to history, you see that banks followed closely all key interest changes operated by BNR, by cutting loan interest rates and rising deposit interest rates,' explained Ghetea.

He said that the current deposit interest rates are exaggerated, given the fact that in order to support them the banks need to get ever broader profit margins capable of supplying both lending and deposit activities.

The ARB president added that the banks requested the cut of the key interest rate and of the minimum reserves, as well as the change of regulations on mortgage loans to individuals, for a continued economic growth and for encouraging investments in infrastructure, both of which influence the Romanian workforce and industry.

Valentin Lazea, chief economist with the National Bank of Romania (BNR), said that of recent, the lending growth rate has slumped to just 15 - 20 pct in average from rates higher than 60 pct immediately after the county joined the European Union.

'Whereas in the first part of 2007, credits in domestic lei prevailed over foreign currency loans, the trend reversed subsequently, despite BNR warnings to the population of the currency risk. Unfortunately, a shrinkage of deposits in lei is noticeable between Oct. - Nov. 2008, despite the high practiced interest rates. The credits-to-foreign currency deposits ratio is 1.35, the ratio of credits to deposits in lei is 0.95. A 2-euro foreign credit corresponds to a one-euro worth of credit in domestic lei,' explained Lazea.

He mentioned that the banking system should head towards the diminution of the foreign currency credit, given the downward trend in foreign capital flows and the rise in the loans/deposits in lei ratio.

 

Sursa: http://www.rompress.ro

Tags: interest foreign rates economy president boost euro bnr cec

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