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Isarescu: We think of new measures to discourage lending in foreign currency

Governor of the National Bank of Romania, Mugur Isarescu, said that the risk already exists that successive rises in the monetary policy interest rate translate into the market by discouraging lending in lei and encouraging loans in foreign currency.

“This is a shortcoming of the monetary policy: you rise the key interest rate, and implicitly discourage credits in national currency and encourage those in foreign currency,” Isarescu explained at a conference organized for the presentation of the quarterly report on inflation. BNR decided the previous week to put up again the key interest rate by 0.25 percentage points from 9.5 pct to 9.75 pct per annum, in what is the fifth such successive step. The BNR head said that the issue of the rising credit in foreign currency is a constant concern for BNR and actually for all central banks in most emerging states. Isarescu said that BNR seeks measures to discourage foreign currency lending – consumer credit especially – by solutions that also require the involvement of commercial banks. “We further think of other measures to discourage credit in foreign currency, including also a more attentive cooperation with commercial banks. In this sense, we hail the proposals made by some of them to take voluntary action to stop lending in foreign currency. Because commercial banks too are aware of how risky developments in foreign currency lending are for them,” Isarescu declared. In a recent interview with Ziarul Financiar, Erste Bank CEO and president of the BCR Supervisory Board Andreas Treichl, called on commercial banks to close an agreement with the central bank to put a break on consumer credit in foreign currency. “In the last six or eight weeks we succeeded in capturing the attention of the central banks of Romania and Hungary and of the Euroepan Central Bank, we discussed with governors Mugur Isarescu and Andras Simor. I believe it is quite likely that in the next six months we witness approaching for putting a break – in as much as possible - on lending in foreign currency,” said Treichl. Another two renowned bankers - Raiffeisen Bank CEO Steven van Groningen and president of CEC Bank and of the Romanian Banks Association Radu Gratian Ghetea had adopted a similar public stance for halting the credit in foreign currency. Ghetea proposed early this year that a limitation be imposed on the grant of credits to individuals who should borrow only in the currency in which they also collect their incomes. The BNR governor also said that the recent key interest rise was not aimed at discouraging lending, but shows BNR’s interest for savings in national currency. “By putting the key interest up we wanted to transmit that we are concerned with stimulating savings,” said Isarescu. He added that the 0.25 pct rise shows that inflationist pressure further exists, yet more appeased. In March 2008, the National Bank had put up the monetary policy interest rate by 0.5 pct, and in February the notch up was one percentage point. Isarescu explained that savings have the capacity to absorb a part of demand in excess, influencing inflation. Savings also ensure the financial stability of the banking system, because they rely on domestic rather than on foreign financial resources characterized by a high volatility. The BNR head underscored that he is only concerned with stimulating savings in lei, and not in foreign currency, because the latter has no perspectives in Romania, given the fact that the interest rates for euros and dollars are low. An element that could boost savings in foreign currency cold be the depreciation of the leu or relevant perspectives, but Isarescu considers that a message in this sense would be wrong. In its last meeting, the BNR Board also decided to keep the minimum mandatory reserves for lei and foreign currency unchanged. Isarescu said that a downward adjustment of the MMR will be operated only when the National Bank consolidates its position as creditor. The BNR head said that lending has only a slothful reaction to key interest adjustments, as segments that have not yet attained saturation exist here. “The rise in the interest rate does not discourage credit. The banks’ response to such rises is delayed because of the battle for market share fought on the lending component,” said Isarescu. Sursa: http://www.actmedia.ro

Tags: currency isarescu foreign credit savings banks bnr national measures interest discourage lending cec bcr

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