“I appeal to bankers as well as companies to promote and use hedging instruments [taking a position in a futures market opposite to a position held in the cash market to minimize the risk of financial loss from an adverse price change], especially in the context of a high volatility on the foreign currency market,” Danila said.
He added that the real sector is very poorly protected against currency risk and is generally a natural protection which does not entirely cover the risk, especially when companies take out currency loans and do not develop export activities.
Although hedging can be made on the Sibiu Stock Exchange, almost nobody is using this instrument, due to lack of liquidity and a market maker, stock exchange officials say.
Danila estimated that Romania will have to face a widening of the current account deficit of 14 percent in each of the coming two years, while economy is expected to grow by an annual average of 6 percent. He also said major international banks see great business opportunities in Romania. According to BCR’s CEO, the widening of the current account deficit indicates that Romania needs restructuring and investments. Industrial production rose by 7.1 percent and inflation registered a downward trend.
“Competition on the Romanian banking market is increasing between international players. Romania is one of the main scenes where world players are fighting. The market’s potential is high and financial intermediation still low, the asset/GDP ratio was 51 percent by the end of 2006, compared to other countries in the region, some of which even exceed 100 percent,” Danila said.
He added that 90 percent of the banking assets are controlled by foreign lenders, most of which have a significant presence on the Central and East-European market. He said he was confident that the Romanian equities market will develop as the economy consolidates and the companies’ market value increases visibly on the stock exchange.
One of the domestic banking system’s features is that banks get closer to their clients, which is a major advantage lenders have in financial services.
“Efforts made to increase the proximity degree were very clear. Network expansion has recently became a strategic objective for many Romanian banks,” Danila said, stressing that 900 new branches were opened in 2006 and 1,000 new units are estimated to enter the market this year.
“Romania is one of the main scenes where world players are fighting. The market’s potential is high and financial intermediation still low Nicolae Danila CEO, Banca Comerciala Romana
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