The state would better guarantee credits to SMEs than capitalize CEC Bank, pundit says

Publish date: 16-02-2009
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The state should not have injected money to capitalize Romania's oldest lender CEC Bank, but rather use them to hike the guarantee and counter-guarantee capacity of loans given by commercial banks to small and medium sized companies (SME), financial consultant Bogdan Baltazar declared.

He added 90 percent of the loans given to SMEs are assigned by foreign lenders in Romania.

Romania's anti-crisis plan stipulates CEC Bank's capitalization by 900 million lei, while Romanian lender Eximbank will hike its share capital by 70 million lei by using last year's profit.

Baltazar deems the capital injection for CEC Bank is too large.

The plan also foresees 400 million lei for a counter-guarantee fund, but not for the capitalization of guarantee funds of loans given to SMEs. 

The state is massively supplied by commercial banks, when it takes loans from the local market with annual interests of 11 percent, as credit institutions buy state securities at a loss so they can borrow money from the central bank (BNR) through the lombard credit, Baltazar said.

He deems the state should get loans at an interest of 17 percent in best case.

Baltazar added Romanian lenders accept to finance the state cheaper as they need the state securities they buy so they can borrow money from BNR.

The minimum mandatory reserves set up by commercial banks at BNR stand at 40 percent for passives in foreign currency and at 18 percent for the ones in lei. The interest is of 5.6 percent per year for lei and of 2.8 percent per year for foreign currencies, starting with December 24 2008 - January 23 2009.

Commercial banks can borrow money from the central lender through the lombard credit at a current interest of 14 percent per year and guaranteeing with state securities.

Romania's Finance Ministry sold discount treasury certificates maturing in 12 months for 182.34 million lei on February 9, at an average yield of 11.5 percent per year, below the 14.23 percent yield established in December last year.


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