Banks set to lower interest rates after BNR decision

The first estimates of several bankers interviewed by Business Standard indicate a 0.5 percent drop in interest rates, similar to the BNR cut.

The liquidity shortage, especially visible in the final quarter of 2008, forced banks to increase interest rates even above 20 percent for lei deposits, in an attempt to secure fund. Banks that entered the interest rate race are now compelled to balance their loan/deposit ratio, on one hand, but they need resources to resume lending, on the other hand.

In the final half of 2008, some banks were even adjusting the level of interest rates twice a month. The best interests for deposits were provided by subsidiaries of Greek lenders.

Romania’s largest lender, Banca Comerciala Romana, owned by Austrian Erste group, already lowered the interest rate for a two-year maturity deposit by 0.05 percent. “The BNR decision is a strong signal for the interest rate level decline, for both deposits and loans. BCR already made a fist step and we will fit in the strategy designed by BNR,” BCR’s Communication Manager, Corneliu Cojoracu, said.

The local branch of another Austrian lender, Raifffeisen, is considering a similar step. “I am not ruling out a drop in interest rates for loans and deposits. We will probably operate a 0.5 percentage points drop,” Raiffeisen Bank Romania’s First Vice-president, Marinel Burduja, said.

The second-largest player on the local market, BRD - Groupe Societe Generale, is to announce soon changes of the interest rates. “We are analyzing the situation of interest rates, for the moment. There are talks about interests for both loans and deposits and a result is to be announced soon, the company’s Deputy General Manager, Petre Bunescu, told Business Standard.

Local lender Banca Transilvania made as much as three interest rate cuts for deposits in the past two months and more such moves are being considered. “Tomorrow [today, ed.n] in the afternoon, we will have talks on the issue. We will probably lower interest rates again, a little,” the bank’s General Manager, Robert Rekkers, told Business Standard.

Other banks also announced lower interest rates for deposits, such as Banca Transilvania, OTP Bank, and Alpha Bank. However, their decisions were made before BNR decided to cut the key-rate. Small lender RIB made an aggressive cut to lei deposits, up to 1.25 percentage points.

Furthermore, a Top 10 lender, Unicredit Tiriac Bank already reduced interest rates and is considering further cuts. “ Unicredit Tiriac Bank this month lowered interest rates for new retail loans by up to three percentage points, to improve accessibility, especially as far as real estate loans are concerned”, according to the bank’s Retail loans manager, Alina Lupes. “Furthermore, interest rates for new deposits were lowered by 0.5 percentage points, following the market trend. In the following period, further cuts in deposit interest rates could follow, if the market follows this trend,” she added.