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Press statement from Mugur Isarescu, the Governor of the National Bank of Romania


Over the past weeks, the National Bank of Romania continued to monitor and assess the relevant data from the perspective of the economic impact of the COVID-19 pandemic, as well as the effects of the monetary policy decisions and measures adopted by the NBR Board in the meetings of 20 March 2020 and 29 May 2020, while acting to put these decisions and measures into practice.

The liquidity shortfall on the money market remained at relatively significant levels and, as a result, the NBR continued to provide liquidity to credit institutions by conducting bilateral repo operations, their daily average stock standing at around lei 3.7 billion in the period from 15 June to 15 July. Moreover, the NBR continued to purchase leu-denominated government securities on the secondary market, the total volume of which amounted to almost lei 4.4 billion on 15 July 2020.

This approach enabled the good functioning of the money market and other financial market segments, with a view to ensuring the smooth financing of government expenditures and of the real economy, amid the relative stability of the EUR/RON exchange rate. Hence, the period from 15 June to 15 July 2020 saw 12 MPF issues on the primary market for government securities, totalling around lei 10.0 billion, most of which were markedly oversubscribed. In fact, government security issues reached in June the second historical high in gross value terms and an absolute high in net value terms. The average accepted rates at auctions declined further, more sharply for longer-term securities, also due to a slight downward correction of the risk margin.

At the same time, the 3M ROBOR rate dropped to 2.15 percent, hitting the lowest post-April 2018 level, while the IRCC fell to 2.41 percent at the beginning of the third quarter. Furthermore, the reference rates on the secondary market for government securities stabilised almost across the entire maturity spectrum at levels close to this year’s lows recorded in the first 10-day period of March.

In turn, interest rates on new bank loans to households and firms followed a clear downtrend in recent months, averaging out at 6.05 percent in April, from 7.24 percent in February 2020, while the average remuneration of new time deposits remained relatively steady at 2.09 percent in April and May, against 2.12 percent in February. Hence, the spread between the average lending and deposit rates dropped sharply, touching a nine-and-a-half year low in April, whereas on the segment of non-financial corporations the spread narrowed in May 2020 to an all-time low.

Developments in public health continue to generate unprecedented uncertainty and major risks to the outlook for economic activity and to financial market functioning, with an impact on macroeconomic stability and financial stability. Therefore, the NBR will further monitor all relevant developments and will update the assessments, while continuing to act towards providing the necessary liquidity to the banking system (without affecting the relative stability of the leu exchange rate) amid a gradual and sustainable reduction in interest rates. The measures will be carefully calibrated so as not to discourage domestic savings, the main source of financing for the real economy and the budgetary sector.