Romanian Bankers See Rates On Leu, Euro Loans At Close Levels In 18 Months

The gap between interest rates on Romanian leu- and euro-denominated loans is likely to narrow in the next 18 months, provided the cost of domestic currency lending will continue its downward trend, the head of Romanian Banking Association (ARB) said Tuesday.

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At the same time, the cost of foreign currency lending is poised to increase, due to a higher Euribor, said Radu Ghetea.

"The European Central Bank has artificially kept Euribor at very low levels during the past two years (…). I believe Euribor will reach around 2% by year-end," he said.

Regarding the interest rates on deposits, Ghetea said the interests are unlikely to drop to European levels.

Romanians banks use the Euribor (Euro Interbank Offered Rate) and Robor (Romanian Interbank Offered Rate) indicators to calculate interests on private loans.

In April, the ECB has increased its key rate to 1.25% from a record low of 1%, set in July 2008. Economists expect further increases by year-end, due to rising inflationary pressure.

Three-month Euribor lending rate was 1.434% on Tuesday, close to a 2-year high hit last week.

On the other hand, Romanian central bank kept its main rate unchanged at a record low 6.25% for the eighth straight time in May. The bank also froze the minimum reserve requirements at 15% for Romanian-leu denominated liabilities and at 20% for foreign currency liabilities.

Three-month Robor fell to 5.45% in May, from 5.68% in March.

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