The National Bank of Romania (NBR) is preparing to loosen its grip on the foreign exchange market and will allow all operations by both residents and non-residents, eliminate restrictions imposed on companies, in particular foreign currency buy orders. An NBR draft memo on modifications to the foreign currency regulation says "access to the interbank foreign exchange market with buy and sell orders is free for the conducting of current or capital operations in foreign currencies as well as operations conducted in foreign currencies between residents as specified in Article 8, paragraph (2) and (3) of the regulation."
The NBR agreed to more flexible access to the currency market for residents and non-residents alike in terms of being able to buy foreign currency in order to boost the liquidity of the foreign currency market, which has seen increasing amounts of surplus foreign exchange, and to make the flow of bought and sold currency more fluid.
"This will be an important benefit to companies, which will be able to decide with no restrictions as to whether they want to be players on the foreign exchange market once they can place buy or sell orders whenever they please," said Florin Pogonaru, chairman of the Association of Businessmen in Romania. He believes this could help lessen the volatility of rates on the currency market.
Current law requires the production of explanatory documents before access can be gained to the market in terms of buy or sell orders. Limitations are applied to both resident legal bodies (which can only make payments or transfers related to current and capital account operations in foreign currencies), as well as to non-residents (who are only allowed to exchange amounts in ROL that were acquired by law).
One of the players accepted by the central bank will be Posta Romana (Romanian Post Office), which will be allowed to place buy orders without producing any explanatory documents if it does not have enough cash to hand to meet the payments incurred as an agent for money transfer operator Western Union.
The same will be applied to every financial investment service company authorised by the National Securities Commission (CNVM), which will have the unrestricted right to buy foreign currency.
These are sources of foreign currency purchasing that could temper the pressures caused by the appreciation of the ROL due to ever-higher inflows of foreign currency. At the same time, the increasing number of players with access to transactions could enter the market with quite different expectations of exchange rate trends due to increasingly frequent fluctuations. Expectations materialising in buy and sell orders could lead to a relative stabilisation of exchange rates.
Another novelty of the NBR draft memo is the proposal to set a firm date for the deregulation of operations with financial instruments currently traded on the Romanian market, as well as for those in current and deposit accounts held by residents abroad.
razvan.voican@zf.ro
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