The depreciation of the leu means losses for SMEs worth RON 5 bln

Small and medium-sized enterprises (SME) could register the greatest losses, as they are most exposed to foreign currency risk. "Not many SMEs can afford to pay thousands of euros monthly for experts to offer them the best solutions to protect themselves, so the exposure of SMEs to the foreign currency risk is the highest," said Ion Dragulin, Manager of BNR's Financial Stability Department.

Dragulin said that if the depreciation of the national currency reaches 30 percent, local companies which operate as net importers would lose up to RON 7 bln (€1.97 bln) in operational profit.

Even if most companies try to protect themselves against foreign currency risk, the covered value is low, of some 10 percent. The percentage of SMEs resorting to banks to finance their activity is below 14 percent, and in these cases loans account for some 20 percent of their balance sheet.

"SMEs generally prefer to finance their business from reinvested profit or by commercial or intra-company loans. Moreover, in June 2007, 67.5 percent of company loans were granted to SMEs, which make up 57 percent of the private external debt in the medium and long term," said Dragulin.

Though the exchange rate risk is high, a possible shock on the interest rate would not affect the company sector significantly, as the share of interest spending of SMEs is below 5 percent in total spending.