The cost of lending in ROL will keep going down over the next period, with enough room for a rate cut by several percentage points by yearend, officials of the National Bank of Romania (NBR) say.
On the one hand, the monetary policy to be embraced by the central bank will be devised as to allow this move, and, on the other, the banks will see it is best for them to place their cash in ROL, following reduction of the minimal compulsory reserves.
"NBR will keep supporting the rate cut for ROL credits, but only down to a level at which banks can still cover their expenses. Anyway, I think the interests will shed several percentage points until the end of the year. The banks have every reason to cut these costs," NBR Governor Mugur Isarescu said.
This can be regarded as a new message sent out by the NBR officials to push the market towards lending in ROL, which comes only several weeks after they publicly expressed concern about too high a foreign currency exposure of the banks. Dollars and euros account for 65% of the total lending. A possible shock on the ROL exchange rate would immediately show in the repayment of these loans.
The first step NBR took to boost lending in ROL, and also the most mentioned one, was the reduction of the minimal compulsory ROL reserves the banks have to deposit at NBR. From 30% early this year, the minimal ROL reserves have now reached 18% and they will keep going down, as the NBR says. The increase in the bank's ROL liquidity, more than 5,000bn ROL, has also shown in the decline of ROL credit costs: from 45-50% early in the year to 27-30% a year now. The Finance Ministry is also a supporter of NBR's policy, as the former has managed to cut yields on T-bills by more than half from 40% this January to 18-20%.
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