The National Bank of Romania (BNR) does not simply aim to stimulate credit toward rational exuberance, a rapid credit growth that will end in the explosion of non-performing loans, BNR Governor Mugur Isarescu said on Wednesday at the seminar on "Target: Boosting financial intermediation".
"Today we have organized a seminar-debate on a topic that has long preoccupied us all: how to healthily grow financial intermediation, namely to have an increase in non-government credit at a higher rate than economic growth. In other words, there should be an increase of the share of non-government credit in the Gross Domestic Product. Although it is not in the title of the seminar, I chose to use the phrase healthy growth intentionally, to specify from the beginning that we do not want just any kind of credit rise. We are not proposing to stimulate credit towards the area, let's say, of rational exuberance, to use Alan Greenspan's words, exuberance or rapid credit growth that ends in the explosion of non-performing loans, and then or at the same time in vehement accusations against banks for a so-called misleading behavior or that ends in trust between the bank and the customer being lost and then many, many steps backwards in terms of intermediation," said Mugur Isarescu.
The BNR head mentioned that he has been through this "nightmare" twice and does not want to repeat it. The BNR governor mentioned that this phenomenon happened in the 1990s, but also in the 2000s, following lending in foreign currency.
"We are not stepping on the lending accelerator at any risk. We do not want this and that is not the purpose of today's seminar. To find appropriate answers to this challenge - how to healthily increase financial intermediation - we first resort to dialogue between stakeholders, between banks and customers, between authorities and customers, between institutions and the media, between different parties that express themselves and say they represent the public opinion. For the time being, we are not presenting the conclusions today, we do not have any, but we are presenting to you perspectives, ideas, problems, possible solutions, under debate, in order to elaborate in the next months a report that addresses this extremely important problem," said Isarescu.
According to the Central Bank official, the the preliminary draft report has already been drawn up but cannot be presented.
Mugur Isarescu added that a working group has been established at the BNR since last year which is being chaired by the former deputy governor of the BNR, Eugen Dijmarescu. This working group has been trying to "put together for some time" a series of proposals in different fields: educational, legislative, administrative, technological. The proposals would provide a concrete answer to the issue of the capping of financial intermediation in recent years, the governor said.