Interest rate decline is a necessary prerequisite, but not a sufficient condition, for lending to be resumed, with a major hindrance being banks' risk aversion, besides the demand drop, Radu Craciun, chief investment officer of Eureko Pensii, told ZF in an interview.
He believes that a decision by the NBR to ease up its monetary policy would be normal in the wake of the agreement reached with the IMF and the EU, because it is completely atypical and inopportune for interest rates to stay at the current levels despite signs pointing to such a strong economic decline.
At the same time, Craciun believes a change in banks' approach is also necessary, and banks should give up interest spreads embraced in recent years.
"A different way of thinking is necessary because the gold rush is over. (...) Banks should be willing to accept smaller profit increases or even small declines, until this period is over (...)"
Radu Craciun, an experienced analyst of the financial market and of macroeconomic trends, believes lending is likely to rebound as late as this summer, assuming the NBR started relaxing its monetary policy.
"The first step should be cutting minimum compulsory reserves to re-couple inter-bank market interest rates with the monetary policy interest rate."
As for the risk of foreign banks withdrawing money from Romania, Craciun states that once the complete liberalisation of the capital account has been assumed, this also entails foreign currency repatriation and the introduction of some restrictions "would harm our image on the market".
He believes that in the current context the NBR needs banks and banks need the NBR and a conflict between the two sides is not desirable.
Referring to the IMF's involvement in the discussions between the NBR and banks on avoiding foreign currency withdrawals, Craciun considers the Fund's role would be to give more weight to the agreement with foreign bankers.
Even in the absence of some political disputes, Craciun believes the exchange rate's volatility will maintain, though foreigners' temptation to speculate against the RON will be declining given the existence of such a consistent foreign financing package.
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