BNR releases €1.2 bln from the banks’ reserves

BNR’s Board of Directors met in a special session yesterday to analyze the budgetary, monetary and financial implications of the postponement of the bail-out tranches scheduled for the fourth quarter as part of a multilateral agreement between Romania and several international financial institutions. Practically speaking, the central bank is releasing €1-1.2 billion from the reserves set aside by commercial banks, so that lenders may have liquidity and finance gaps in the state budget.

“I was not expecting this decision, so soon. But I must say it is not devoid of logic. Some stabilization was felt. The decision will bring more liquidity and boost the growth of the economy,” Alexandre Vincent, analyst for Emerging Europe at BNP Paribas in Paris, told Business Standard.

Local bank analysts, however, said they were expecting such a decision. “Even if the tranche from the IMF [International Monetary Fund] had entered Romania’s accounts, we still needed money. This is necessary for financing the budget deficit. As we all know, a new ‘club loan’ could be created, and I believe that the interest rate will be similar to that of the previous club loan, of 5.25 percent,” Nicolaie-Alexandru Chideşciuc, Senior Economist of ING Bank Romania, told Business Standard.

The Chief Economist of Banca Comercială Română (BCR), Lucian Anghel, said that this is a “relaxation of the monetary policy.”

“There are signs of macroeconomic stabilization. There are also signs of stabilization of the exchange rate, as depreciation pressures were not significant. This decision does not change the general data significantly, but is a step towards normality. Practically speaking, there will be more liquidity on the market, which will allow banks to grant loans to the economy,” said Lars Christensen, Head of Emerging Markets Research Danske Research within Danske Bank.

The Ministry of Public Finance (MFP) attracted €793.8 million from the domestic market on 6 November through a three-year maturity state bond issue with foreign currency coupon, which covers half of the third tranche that Romania was initially to receive from the IMF in December and which was supposed to finance the 2009 budget deficit. Back in July, MFP borrowed some €1 bln from local banks, through a “club loan” arrangement, for the same purpose. The banks that participated in this “club loan” were BCR, BRD-Groupe Société Générale, UniCredit, Raiffeisen, Banca Transilvania, Volksbank, Bancpost, and Alpha Bank.