Banks to pay 2-3 percentage points more for external financing

Analysts believe that external financing will be much harder to obtain, due to a drop in liquidity on international markets, which will affect the business of Romanian banks, because lenders operating in the local system are holding one third of the total foreign debt, of €65.60 billion.  The rising cost of external financing and speculation against the leu has already led to higher percentages in bank interest rates.  “Any downgrading cannot but hamper the activity of banks to attract foreign sources.  Foreign currency liquidity will be harder to obtain.  But the decisions to downgrade were made by people who sit in offices, and who are unaware of Romania’s reality,” according to a declaration for Business Standard by Radu Gratian Ghetea, President of the Romanian Banking Association.  The Fitch downgrading comes less than one month after Standard&Poor’s made a similar decision. 

Romania’s position as the only European Union state with a “junk” status (not recommended for investments) puts increased pressure on the costs of attracting external financing and on the depreciation of the leu.

Dragos Cabat, President of the Romanian Association of Financial Analysts (CFA) told Business Standard that this most recent downgrading could make euro-denominated loans 3-4 percentage points more expensive.