Cut-off In Mother-Bank Funding Could Spell Trouble For Two Romanian Banks – Ctrl Bk Official

Even if the impact might seem low, Romania still needs to cut back on foreign currency lending, Popa said during a monetary policy seminar organized by the central bank.

Popa said that, in the context of turbulence on international markets, Romanian economy could be faced with several risks. He emphasized the persistence of a deviation from planned inflation targets and added that in the central bank’s latest report, this deviation will practically continue for a year and a half.

"I don’t think many things will change by the next inflation report, but I don’t want to speak too soon," Popa said.

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The central bank official warned that Romania is not immune to the turmoil on international financial markets and admitted the recent heavy depreciation of the Romanian leu to the euro has influenced the central bank’s decisions.

"Even if this was a correction from the unsustainable level reached last summer, these corrections are important and cannot leave monetary policies unaffected,” Popa also said.

He also considers Romania has the upperhand on other emerging markets in the region in terms of liquidity and size, and that keeps it attractive for foreign investors.

However, he added, the Romanian financial market is not large enough to drive international investment banks into deeper analyses.

The central bank official sees foreign investors still interested in the Romanian market, but playing it safe.

On the other hand, Popa sees low risks on the country’s economic growth and the only danger could arise from a reduction in foreign commercial exchanges. Another correction could occur at the level of transfers, as the bulk of Romanian immigrants are in more affected countries, such as Italy and Spain.