Banks do no have solid enough arguments to justify thesubstantial increase in the yields they are asking from the FinanceMinistry during T-bill auctions, since the National Bank has notraised the interest rate and the sovereign rating has not changed,either, Finance Minister Sebastian Vladescu says.
"Our decision to turn down the offers during successive auctionswas generated by the quite heavy pressure coming from banks. Givenhow they raised yields in a matter of a weeks, without there beinganything connected to a trend of NBR's refinancing interest or thesovereign rating, we could not have reacted in any other way. Weare not desperate, we have money in the Treasury, so we arefighting banks. They have their arguments, we have ours, it remainsto be seen which are more powerful," Vladescu told ZF in aninterview.
This is how he explains the three failed T-bill auctions in fourweeks, with the Finance Ministry blaming "the unacceptable level"of the yields requested by banks each time. In April, the FinanceMinistry had managed to pressure treasury certificate yields downto less than 6%. Now the yields requested by bankers stand atalmost 8%.
Vladescu admits banks can use the turmoil created by thesituation in Hungary as an excuse, as well as the motion of censurethe Government is facing, but does not believe there are enoughreasons for the yield hikes, as long as the interest at which theycan get cash from the NBR has not changed.
"We say we have an extremely sound programme, which should givethem confidence. Banks need us, too, and we are ready to play thisgame," Vladescu said, throwing down the gauntlet.
The Finance Ministry had announced it had scheduled T-billissues worth 4.6 billion RON (1.09 billion euros) for this month,but the first two auctions failed. The issues subscribed in Mayamounted to 2.53 billion RON, compared with the announcedvalue.
The inflexible position of the Finance Ministry towards thehigher yields requested by banks can be explained by the fact thatthe Treasury has a buffer fund of about one billion euros createdat the recommendation of the IMF after the eurobond issue in March,precisely to be able to navigate such times of pressure from banks.At the same time, the prolonged decline in private lending leavesbanks with little choice for placing their money so that they endup looking at T-bills at some point.
Over the last few weeks, bank dealers have imported the negativesentiment from the Western markets, also reflected in a newincrease in the rates of the CDS for Romania to over 300 basispoints. Thus banks are currently lending each other RON on theinterbank market at 6.8% for three months (the Robor valuecalculated by the NBR on Friday), more than two percent higher thanthe 4.7% reached in April.
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