Banks continue to borrow from abroad but shift to long maturities

Banks continued to borrow from abroad in the first quarter, with the savings ability of companies, as well as of the population diminishing, and the trend being to switch from shorter maturities to longer ones.

The long-term foreign debt taken out by banks, which largely reflects funding secured from foreign shareholders, went up by more than a billion euros in a year, to EUR16.2 billion at the end of the first quarter, while the growth rate of short-term debt was much slower.

"Most of banks' foreign loans used to be short-term, with the debt being rolled over, but there are advantages related to the minimum reserve requirements. Deposits with maturities of over two years are exempt from payment of the minimum mandatory reserves. This could be the explanation," believes Radu Crăciun, investment manager at Eureko Pensii.

The decline in banks' short-term debt could be explained by the attempt to turn some of the short-term funding into long-term loans in order to improve cash flow indicators.

Banks' overall foreign debt reached EUR22.9 billion at the end of March 2011, EUR1.3 billion more than in March 2010.