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BNR Governor: RON appreciation, hard to counteract


The measures adopted by the National Bank of Romania (BNR) have had positive effects and one of them was that the financial system remained stable and the banks did not ask for and did not receive bailouts, the BNR Deputy Governor stated in his turn.

The National Bank finds it hard to counteract the RON appreciation when lowering interest rates is difficult and there is an excess of liquidity at global level, BNR Governor Mugur ISARESCU stated, on the 19th of April.

"I looked on the screens now and interest rates are falling below 2 percent. (...) How could we solve this problem, how low should we take the interest rates? Maybe we'll come up with some innovations because at the European Central Bank we are known as the Central Bank that came up with most innovations as it is", ISARESCU said when presenting Lucian CROITORU's report on the speculative attack that took place in October 2008.

The BNR Governor pointed out that, in order to "not allow" the national currency to appreciate, the Central Bank should buy forex once again, something that would mean resuming the excessive liquidity cycle and would put added pressure on the interest rates that are at a very low level anyway.

"There is an excess of liquidity in the world. It is most visible on the Turkish and Brazilian markets, but Russia has some fluxes, too. Let's see how they will fare. Capital fluxes will completely change paradigms", ISARESCU added.

In ISARESCU's opinion, "the forex flood" could be even more dangerous than "the forex drought".

"What does one do when there are large capital inflows? Could one lower the interest rate to 1 percent when one has a 6 percent inflation rate? Yes, but we didn't have the courage to do it. Anyway, doing that would have taken us completely out of our interest rate target", ISARESCU added, talking about the situation prior to 2009.

Two weeks ago, ISARESCU stated that in October 2008 BNR's operations were not meant to "defend the national currency", seeking instead to stop a panic attack in order to avoid forex withdrawal pressures turning into a migration of savings from RON into forex, something that would have affected forex reserves.

Attending the debate on CROITORU's work, the Chairman of UNICREDIT Tiriac's Board of Administrators, Dan PASCARIU, stated that the National Bank of Romania (BNR) would have had to state, clearly, if Romanian banks were to blame for the situation in October 2008, as, following allegations made at the time, there were merchant banks which suffered the consequences and people's lives were affected.

In October 2008, several BNR officials spoke of an attempt to manipulate the market by bank dealers, in the context of the attack against the RON initiated by foreign investors at the time and criticized harshly several Romanian commercial banks. Following this scandal, the head of the UNICREDIT Tiriac Treasury, Bogdan MIHOC, had to leave the bank, and Lucian ISAR lost his position as Deputy President of BANCPOST.


Published on 20.04.2011




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