BNR: The derivative market is underdeveloped

"Considering the increasing level of volatility, hedging instruments should be used more. The reduced volume is proof that we are an underdeveloped market," according to a statement yesterday by Vice Governor of the National Bank of Romania (BNR), Eugen Dijmarescu. BNR data indicates that the total volume of derivative operations registered in the past nine months is equal to one consistent day of trading on the spot foreign currency market.

The share of revenues from operations with this type of product in total revenues is a tiny percentage, said Misu Negritoiu, General Manager of ING Bank Romania. The national currency continues to depreciate. The reference exchange rate announced yesterday by BNR, of RON 3.4615/€1, registered a new record high in the past 12 months. But analysts expect an appreciation of the leu by the end of 2007, caused by massive foreign currency entries from Romanians working abroad.

Though specialists estimate the derivative market will double in 2008, due to higher volatility of the exchange rate, the percentage of exporters operating such instruments is insignificant. This could be due to poor forecast management. Main companies using such a strategy, most of which are multinationals, are facing a competitive environment. In developed countries, the use of instruments for protection against the exchange rate is a common practice. More than 90 percent of companies included in the list of the world's Top 500 largest companies are using such instruments.