The banking intermediation will remain preponderant on the Romanian financial market, yet an increasingly visible diversification is needed for the other segments, NBR vice-governor Cristian Popa says.
"We are dissatisfied with the development of the traditional markets, with their lack of sophistication, even for the essential products. This sophistication will come in time," Popa says.
One of the reasons is the "absence of sophisticated players." Early in 2004, the secondary government securities market still sees very little liquidity, the stock market capitalisation does not go over 12% of GDP, the insurance sector is still underdeveloped.
Practically, the Romanian financial market is trapped into a certain vicious circle: the financial institutions do not take the trouble of offering sophisticated products because there are no sophisticated clients to demand them and the clients do not demand sophisticated products because there is hardly anyone available to explain their benefits to them and present them with the options.
An example in this regard might be the government bonds bearing an interest indexed in line with the inflationary rate, released towards the end of last year, which met with a lot of reluctance from banks at first, partly because their price is rather complicated to determine and explain to clients.
"How many are those that can assess the price of a derivative instrument today?" NBR vice-governor Cristian Popa wonders. He says there is a framework of regulations in place that should allow developing more sophisticated financial instruments. "The regulations for derivatives, for instance, are not really specific, so that they can cover several types of instruments. They also provide for the execution of the underlying collateral," Popa says.
"In the absence of a extremely solid legislative framework, one cannot issue more sophisticated instruments because one cannot execute them," says Misu Negritoiu, ING Bank Romania's deputy general manager.
He says the broadening of the financial instrument supply is also hindered by the gap between the interest levels and the risk attached to various placements.
Negritoiu says that even the execution of the collateral in the case of executory loan agreements remains a big problem, as it requires a bank to spend too much time and money on it.
"The functioning of the financial markets is essential. We can give them a push by trying to sell the credit risk. Removing that from their own balance sheets, the banks could find it easier to meet even the prudential supervision criteria, by reducing exposure," Misu Negritoiu explains.
razvan.voican@zf.ro
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