One thing is certain: after the recent slumps, the gains enjoyed in terms of interest rate payments by banks for ROL-denominated deposits now barely manage to cover inflation. At the same time, the reduction in interest rates on deposits is closely related to cheaper ROL-denominated credit, which became highly accessible some months ago.
Both tendencies, however, were only generated by the high volume of liquidities accumulated on the market, with the NBR decision to attract increasingly smaller sums and offer increasingly lower rates pushing banks to grant more loans and attract fewer deposits.
Still, how high can the cost of this increased accessibility to ROL-denominated credits be, set against the potential for discouraging savings? Is saving with a view to future acquisitions of any further use when loans have become so practical?
"Savings have piled up further over recent months as the risk factor related to inflation has diminished: people are reacting rationally, keeping their money in the bank. Maybe it wouldn''t be too bad, either, if the tendency to save stalls," said Eugen Radulescu, who was recently appointed chairman of CEC and is a former advisor to the NBR governor.
He says that the "massive" inflows of foreign capital are already generating quite a high level of liquidity, without any further need for additional resources derived from domestic savings.
Radulescu believes that the liquidity surplus can do no harm: it either turns into foreign currency or foreign currency-denominated credits, thereby calming the appreciation tendency of the local currency; or it adds to the growth of ROL-denominated credits, which is in no way dangerous as long as it starts from a basis of only 6.9% of GDP.
The former advisor to the NBR governor says the market is no longer in the situation in which high inflation calls for high interest rates in real terms to boost savings with banks, thereby dealing with the inflationary effect related to the depreciation of purchasing power.
"It is true that deposit rates are pretty close to zero in real terms, even when accepting the 7% inflation target. But, once this reaches around 8%, inflation no longer becomes a powerful stress factor for the economy, that is it no longer triggers significant distortions in the decision to invest," said Radulescu.
It remains to be seen to what extent Romanian banking customers accept this type of argument despite being constrained by the low number of placement alternatives, since, at least until they manage to expand their credit portfolios efficiently in order to channel surplus money, banks will continue to offset the costs incurred as a result of NBR policy by "punishing" depositors with the lowest possible interest rates. razvan.voican@zf.ro
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