Romania Central Bank Jan-Oct State Dues At RON1B – Bk Chief

Isarescu said the central bank’s earnings over the mentioned interval came mostly from market operations. Bank reserves management weighed less on the central bank’s profit, he added.

The central bank’s chief mentioned international operations with foreign currency reserves carry yields of around 0.75% a year, well below the yield above 4% carried three years ago. Selling euros on the domestic markets is therefore much profitable, because the central bank usually buys hard currency at rates below 4 lei per euro.

„The central bank can aim at controlling liquidity as well through its intervention on the money market and we believe that preserving our position of net creditor in the banking system is vital to keep our leverages (…) It is highly important we remained a creditor, as the transmission mechanism is much harder when you are a debtor,” Isarescu said.

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He said the central bank might have fallen back to the position of net debtor in the banking system had the Finance Ministry sold on the market the forex attracted over the year.

Since January, the ministry attracted almost EUR6 billion out of the EUR20 billion bailout loan obtained from the International Monetary Fund, the European Commission and other foreign lenders, as well as from state paper issues and hard currency loans from local banks.

The central bank converted the entire amount through monetary issue to avoid extreme variations of the exchange rate. However, the central bank subsequently sold part of the amount on the local market to benefit from profits following forex purchases.

According to Isarescu, the yields offered abroad for forex sales have gotten so low that the central bank is posting losses from the interest paid to the hard currency minimum reserve requirements at commercial lenders.