“Banks prefer lending to the state because, due to the risk, interest rates offered are high, above the inflation rate. At the same time, the state is perceived as having outstanding payment behaviour,” said Radu Limpede, economic analyst. In the event that the next tranche from the International Monetary Fund (IMF) does not enter Romania’s accounts, the current economic and political conditions could lead to the price of money borrowed by the state from banks increasing significantly, because of a downgrading of the country risk outlook.
This summer, the Ministry of Finance contracted a €1 billion club-loan from eight banks, to cover the budget deficit. This type of financing is more flexible than a syndicated loan or a eurobond issuance.
“In a period of high risks, the state is the safest client of banks. We can say that the state has an “AAA” payment coefficient, the best indicator,” Adrian Vasilescu, Advisor to the Governor of the National Bank of Romania, told Business Standard.
“The more likely a tranche postponement is, the more information is included in the equation and the country risk rises. Romania’s risk is related to perception, not necessarily to macroeconomic data, the latter also not very good. The more negative the perception, the higher the country risk,” Oprescu said.
According to the Alpha Bank official, the last quarter in 2008 was the most difficult for the local banking system in the September 2008-September 2009 period.
“The final months in 2008 were related to a rumour, which came out of nowhere. The entire banking system had very good liquidity, but the market panicked, inexplicable at the time. Clients were concerned, although we were trying to explain to them that local banking indicators are far better than those in the region,” Alpha Bank Romania’s Executive President said.
