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BNR Governor Isarescu: 'Banks go overboard with ROBOR index'

Inquam Photos / George Călin
Mugur Isărescu

Banks went overboard with the ROBOR index and went up much more than the monetary policy rate, the governor of the National Bank of Romania, Mugur Isarescu, told a conference presenting the BNR Inflation Report on Tuesday.

"Here again I think some explanations are needed. As a rule, there is a correlation between the monetary policy rate and the ROBOR. So the ROBOR moves close to the monetary policy rate and it is this interval or corridor of the 1 percent policy rate. The interest rate on deposits from the National Bank is lower and with one percent, it is better to say, one percent above the monetary policy rate, there is the Lombard rate for last resort and overnight lending. And the ROBOR normally moves between the two because this is where banks can also finance themselves and so on. The ROBOR has been disconnected for more than 4-5 months. So, for a better understanding, the banks kind of went overboard with the ROBOR They went up a lot more than the policy rate. Two things are needed to understand what happened. One: these are market interest rates. And markets tend to overreact. That's how markets work all over the world, especially in the periods of crisis, of tension. Overreaction is in English. There are other terms: overshoot/undershoot. So finding the balance point is done through a swing, often between extremes," said Mugur Isarescu, informs.

He explained that this also happens on the foreign exchange markets, but also on the monetary markets or the stock exchange. The governor declared that we have now witnessed an overshoot.

"It is obvious that banks and traders and those who operate on the money market, tend to look pessimistically at the future. Let's move on to the second reason or the second thing that helps us understand. Well, it's not about the overnight interest rates, one week, one month. No. It's about 3-month/6-month interest rates. That's how the banks saw the future. Higher inflation, even much higher, very difficult to contain, no, and as a result...quotations were well above the monetary policy rate and our corridor. But I'm asking this. I'm asking you: who has had a more optimistic view of the future related to inflation, not only here, but in general, in the world, also related to interest rates. I personally, not to speak only on behalf of the Board of Directors, we have also had discussions related to ROBOR. I have to admit, the liquidity conditions probably pushed the banks out of a certain limit, no, to go overboard as I said with ROBOR. We tightened the liquidity conditions, not now, but for a long time, for a very clear reason, to goad the banks to push up the interest rates on deposits much faster. Because it has to do with Romanians there as well and they are really losing. There are 10 - 12 million Romanians who have savings. Some bigger, some smaller. Right? With real negative interest rates, strongly real negative and with rising inflation, they are really losing," stated Mugur Isarescu.

In these conditions, the governor of the BNR sent a personal message to the banks: to look more carefully at the messages of the National Bank. He declared that he "hopes and believes" that in this case, the 3-month ROBOR will approach the monetary policy rate.


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