UPDATE: Romanian Ctrl Bk Cuts Reserve Ratio For Over 2-Yrs Forex Liabilities

The Board of National Bank of Romania BNR decided Tuesday to cut to zero from 40% at present the minimum reserve ratio on foreign-denominated liabilities with residual maturities of over two years, the central bank said.

The decision will be applied starting with the May 24-June 23, 2009 maintenance period.

The central bank kept unchanged the key monetary policy rate at 10% on the year.

It also left unchanged the existing minimum reserve requirements ratios on leu-denominated liabilities of credit institutions at 18%, as well as on foreign-currency denominated liabilities with residual maturities of up to two years, at 40%.

Also in its Tuesday meeting, the BNR Board analyzed and approved the letter of intent sent to the International Monetary Fund regarding the external financing arrangement with international financial institutions and the European Union.

Romania agreed with the IMF, the E.U. and other financial institutions a EUR20 billion program to support the country's external and internal deficit. The first instalments of the loan are expected in May.

"The BNR Board will continue to monitor domestic and global economic developments so that through an adequate use of its available instruments to ensure the fulfilment of its objectives in what concerns attaining and maintaining price stability in the medium term as well as ensuring financial stability," the central bank said in a press release.

The central bank governor Mugur Isarescu said last week that BNR will reduce the minimum required reserves ratio “extremely gradually”, starting with banks’ liabilities in foreign currency and might exclude long term financing from their calculation base.