Romania’s Ctrl Bk Sold EUR1B To Drain Excess Liquidity

Isarescu said the only option was draining those sums by selling foreign currency on the market, given that the central bank also decided to cut minimum required reserves for leu-denominated liabilities.

"This led to the decrease of the foreign currency reserve by EUR1 billion, and certain analysts (…) saw it as the only reasonable solution to solve the problem and keep other balances as well. BNR, as guarantor of financial stability, should also consider other balances," Isarescu stated.

The governor added he also voted in favor of cutting the minimum required reserve ratio for leu-denominated liabilities, but at the moment, he regrets the decision, considering the measure was taken too early.

In October 2008, the central bank cut the reserve ratio for leu liabilities by two percentage points, from 20% to 18%. Last Wednesday, the central bank also cut the key rate by 0.25 percentage points to 10%, but kept unchanged the minimum required reserves ratios on both leu-denominated and foreign currencies liabilities at 18% and 40%, respectively.