Isărescu: The market is still distorted by lack of trust. The liquidity is there

Banks will resume lending to customers in the real economy because they have sufficient liquidity, anticipates NBR (National Bank of Romania) governor Mugur Isărescu, although bankers are still reluctant to lend, even to each other, more than two years after the shock of the outbreak of the financial crisis.

"The situation on the money market will improve. The bank's relative excess liquidity will be used. Not all banks have excess liquidity and this reflects another dysfunctionality, that banks are reluctant to lend even to each other. This excess liquidity is concentrated in the hands of 4 or 5 banks. They probably were reluctant to lend their excess liquidity to the banks that had a relative deficit. We believe this will be resolved over time," said Isărescu at the conference organised to present the quarterly report on inflation. Short-term interest rates at which banks lend to each other have hit lows lately because of the excess liquidity.
Isărescu believes monetary market interests will reach the level that they should, close to the monetary policy interest, set at 6.25%, or, perhaps slightly lower.
"We will improve banks' access to liquidity, including through NBR refinancing operations. We are currently in the position of debtor, with small amounts, but as banks resume lending, this position will change."