The introduction of a zero rate for minimum mandatory reserves (RMO) set up by housing savings and loan banks and the elimination of transit sums from the RMO calculation base for all banks are to be delayed until the NBR ends its consultations with the European Central Bank, despite the NBR's Board of Governors having made its respective decisions on May 2.
Since having entered the European System of Central Banks on January 1, the NBR has been following a procedure that entails consultations with the ECB on every regulation draft related to monetary policy instruments and financial market stability, thus depending on the Frankfurt-based institution for approval.
The NBR's Board of Governors adopted the decisions to modify the RMO ruling on May 2, but the ECB received the request to approve the draft as late as July 5 and returned its comments on August 1.
In response, the ECB indicates that the RMO regulation, set by the NBR for banks, continues to be "considerably different" from those followed by the lending institutions of the 13 euro zone members, despite this year's adjustments.
"Differences to the legal framework on the basis of which the Eurosystem operates will have to be eliminated by the time Romania adopts the euro," reads the document signed by Jean-Claude Trichet, ECB chairman.
The ECB does not comment on the RMO level in Romania, though this is huge compared to the 2% stipulated for euro zone banks (20% for RON and 40% for foreign currency) given that EU members not part of the euro zone retain their standards concerning monetary policy, with RMO being a monetary policy instrument.
The NBR largely relies on RMO for fighting inflation, with the reserves utilised as the main tool to keep liquidity in the system at much smaller costs than those related to market operations.
However, the ECB highlights the fact that gradual adjustments to Eurosystem standards are "beneficial". From July 2006, the NBR has maintained the tightest mandatory reserve regulation since 1990 via the level of set-up rates, but this year started to adjust the calculation basis with a view to rallying to ECB regulations.
The NBR governor, Mugur Isarescu, has often spoken of the intention of a gradual easing the RMO regulation, especially in the context where this instrument has come to distort the foreign-currency lending market.
Besides the very high rates of reserves, the ECB also commented on other differences. In addition, the ECB does not agree with the introduction of the zero-rate RMO for housing savings and loan banks. "This modification would widen the difference between the RMO framework in Romania and the Eurosystem framework," adds the ECB in the document signed by Jean-Claude Trichet.
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