“BNR is 3-6 months behind the real economy”

Lionachescu, currently Managing Partner of Capital Partners, who was involved in the start-up of ING Bank in Romania, and worked for lenders Citibank and Bancpost, said that BNR erred when it applied the new lending rules, aimed to curb lending and consumption, when the financial crisis was already affecting Romania. “The inter-bank market is currently blocked, and lending has stopped. BNR’s anti-speculative action was useless, I did not understand it. Hungary’s [central bank] governor was not interested in defending the forint when it was attacked. If the leu is over or under-valuated, it is up to the market to say so. This is not the role of BNR. This ambition of BNR to defeat the assault of foreign banks is like something out of an operetta, Lionachescu told Business Standard. He said that tension between lenders and the central bank is not healthy. “I am not saying that one or the other is guilty,” he added. Last month, an attack against the leu was registered on the currency market. BNR officials, including Governor Mugur Isarescu, announced that three foreign banks were behind the attack, and criticized their tactics.

Lionachescu also spoke about the lowering by 2 percent of the cash reserve ratio (CRR) for lei. “The CRR should have been reduced further, so that interest rates could drop, because there is no cash flow in the economy. Lack of liquidity is not good,” he added. According to Lionachescu, BNR lags behind, “it has no tools and lacks understanding of what happens in real terms.” However, he indicated that central bank officials are doing better than the Finance Ministry and the Prime Minister, “who have proven they are out of the loop.”

“The first measure is to inject liquidity. Lowering the CRR by 2 percent is not enough when the market is blocked. (...) Based on its actions, BNR is some 3-6 months behind the real economy,” he said. Isarescu’s advisor, Adrian Vasilescu, retorted that blaming the new BNR rules for the shrinking of lending is wrong. Vasilescu gave two reasons: “One is that these rules had no effect prior to November 15, so any discussion about this is pure imagination. The second reason is that lending for individuals dropped 1.2 percent in October, compared to September, while loans for companies declined 1.9 percent.” Given that BNR’s new rules were only applied for individuals, and lending for companies declined more sharply, the current deadlock is due to the fact that mother-banks reeled in financing for their local subsidiaries, rather than to the new lending rules, Vasilescu added.

Lionachescu also spoke of measures that must be taken by the future cabinet, which must move quickly to set up an emergency fund, and ensure access to liquidities to cope with a pessimistic crisis scenario next year. Furthermore, the government must avoid protection policies for one sector or another during the crisis, Lionachescu said.

‘Lowering the CRR by 2 percent is insufficient when the market is blocked. (...) Based on its actions, BNR is some 3-6 months behind the real economy' Doru Lionachescu Managing Partner, Capital Partners