Romanian Ctrl Bk Adviser: Lenders Hiked Interests Following The Market

Romania’s Competition Council is wrong in its allegation that banks have agreed on fixing interest rates, as the rate increases were caused by a market phenomenon called "prices sympathy”, said Wednesday Adrian Vasilescu, an adviser of the central bank’s governor Mugur Isarescu.

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"I do not know whether the banks created a cartel," Vasilescu said.

"If you ask me personally, I will tell you the Competition Council is wrong as things are as following: in the economy there is a very interesting phenomenon called prices sympathy (...) This phenomenon is equally valid as regards the banks, so when an institution hikes interest rates for household and corporate deposits, this rate will become likable, so other banks will rush to also raise the interest rate, not following an agreement, but due to a market phenomenon,” Vasilescu said.

Thus, interest rates reached very high levels and the central bank has said the increase of the rates may be dangerous, the central bank official added.

According to Vasilescu, interest rate cuts in the context of an investigation of the Competition Council are “a pure coincidence”.

The Competition Council’s president Bogdan Chiritoiu said Tuesday the council is investigating whether local banks have agreed on fixing interest rates.

The investigation was launched in October 2008, ex officio. At that time, the competition watchdog said the investigation was based on an alleged exchange of information among banks, and "some commercial practices."

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