Romanian Lenders Pay Excessive Interests On FX Deposits – Ctrl Bk Gov

„There are banks that pay 4% to 5% interest on hard currency deposits. I think they are very generous,” Isarescu told a news conference. „A possible explanation is that they’re fighting over customers,” he added.

Another element that may allow bankers to pay high interests could be that they still find debtors who accept to pay large interest loans, he said.

Isarescu said the central bank is „worried” about the lenders’ capacity to cover such high interests.

„We’ve asked them how the banks will be able to produce enough income to cover such generous interests (…). On the international markets, one can barely get 1% for hard currency deposits,” he said.

The central bank official mentioned local bankers replied that they would pay the same 4% interest if they were to borrow from international markets, because of Romania’s high credit default swaps (CDS).

„This isn’t an issue we can neglect, because it’s true,” Isarescu said. He added Romania’s CDS trades 300 basis points above mid-swaps, despite its small public debt, of around 30% of the gross domestic product.

Still, the local banks have enough room to lower their interests on foreign currency deposits by one to two percentage points, Isarescu said.