Foreign currency deposits preferred

“I believe we are talking about a lack of confidence of the population in the leu. Individual clients, as well as companies, want to protect themselves against currency risk, which they perceive as being high. The population may have closed some lei-denominated deposits in September and switched to foreign currency,” Melania Hăncilă, analyst for Volksbank Romania, said. She added that, until such time as the political instability subsides and the confidence in the national currency returns, foreign currency deposits will continue to gain ground.

Data published by the National Bank of Romania (BNR) indicates that lei-denominated bank deposits fell 2.2 percent in September compared to the end of August, to RON 100.6 billion, but rose 5.4 percent compared to September 2008. Foreign currency bank deposits increased 4.3 percent expressed in lei in September compared to the previous month, to RON 61.08 bln, and five percent expressed in euro, to €14.55 bln.

“The political instability has led to this reversal of the situation registered in September. There were times when, in spite of political instability, the exchange rate did not react. Now, we seem to be falling in line with other countries in the region, which registered reactions to such events. We will certainly get the €3 billion from the IMF [International Monetary Fund] and the other financial institutions at the end of this year, and then the confidence in the leu will return,” Cristian Geanaliu, Head of GarantiBank’s Treasury Department, said.

“So far, the population has had a positive perception of the leu but, lately, fear of depreciation has intensified. Rates on both loans and deposits dropped over the past two-three months. On the savings side, we are now nearing a 10 percent interest rate,” the Chief Economist of UniCredit Ţiriac Bank, Rozalia Pal, said.