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BNR sells 1 billion euro for full market sterilisation

Governor of the National Bank of Romania (BNR) Mugur Isarescu on Monday announced that BNR sold 1 billion euro to finally sterilise the forex the State Treasury converted into lei in order to cover the 2008 deficit.

'The Finance Ministry was the seller, and we, the National Bank, the buyer. It was then that we realised that an issue was made, as any BNR buy means a monetary issue and the most solid issue as well, despite the simplifying worries of many that BNR should not issue. When we buy we perform an issuing. BNR announced as far back as last October that it became a creditor. Then, from a creditor we became again a debtor to the baking system,' said Isarescu.

When BNR bought 10 billion euros in 2005-2007, it made an issuing worth 35 billion euros, but I believed it would be too much for the Romanian economy now to get saddled with such amounts, and we decided to sterilise, said Isarescu.

'It was then that an issuing was performed. After last October, BNR announced it became a creditor; from a creditor we became a debtor to the banking system again. And we did another move, apropos of the wish of the commercial bank to cut the level of statutory reserves: we considered a reasonable Government deficit and cut the level from 20 to 18 percent and generated a surplus of liquidity. Had we attempted in December to sterilise by issuing, call money or bank deposits and in the the year-end atmosphere to announce that BNR in fact had a surplus liquidity and perform such operations, I believe that half of you might have justifiably said that we have lost our marbles. Now, looking ahead, I can say that I made a mistake when voting for the statutory reserves. Many of the nine members on the BNR Administration Board who are much more prudent voted against. I, a supporter of the measure, can tell you that that was a wrong step. So, we prematurely cut the statutory reserves levels and created problems in the process,' Isarescu explained.

He said that the additional money injected into the economy in this operation, which seemed the most natural under uncertainty circumstances, aversion to risk, mistrust, political debate - because the Government was then only starting to coalesce - could not be pulled out but through final sterilisation by forex being sold to BNR.

'The analysts, carefully watching our figures, had already spotted a drop by almost 1 billion euro in the BNR forex reserve, the only reasonable solution to break the impasse and preserve balance. Financing the deficit is a problem, and BNR, as its defender of last resort and a guarantor of financial stability, must take a look to other equilibriums as well,' Isarescu explained.

 

Sursa: http://www.rompress.ro

Tags: bnr isarescu billion euro

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