Banks set to lower interest rates after BNR decision

The top bankers on the local market will hold meetings this week to decide when and to what extent the interest rates for deposits and loans are to be reduced. The move comes after a decision made by the National Bank of Romania (BNR) last week to lower the key-rate by 0.5 percentage points, to 9.5 percent, last week.

The first estimates of several bankers interviewed by Business Standard indicate a 0.5 percent drop in interest rates, similar to the BNR cut.

The liquidity shortage, especially visible in the final quarter of 2008, forced banks to increase interest rates even above 20 percent for lei deposits, in an attempt to secure fund. Banks that entered the interest rate race are now compelled to balance their loan/deposit ratio, on one hand, but they need resources to resume lending, on the other hand.

In the final half of 2008, some banks were even adjusting the level of interest rates twice a month. The best interests for deposits were provided by subsidiaries of Greek lenders.

Romania's largest lender, Banca Comerciala Romana, owned by Austrian Erste group, already lowered the interest rate for a two-year maturity deposit by 0.05 percent. "The BNR decision is a strong signal for the interest rate level decline, for both deposits and loans. BCR already made a fist step and we will fit in the strategy designed by BNR," BCR's Communication Manager, Corneliu Cojoracu, said.

The local branch of another Austrian lender, Raifffeisen, is considering a similar step. "I am not ruling out a drop in interest rates for loans and deposits. We will probably operate a 0.5 percentage points drop," Raiffeisen Bank Romania's First Vice-president, Marinel Burduja, said.

The second-largest player on the local market, BRD - Groupe Societe Generale, is to announce soon changes of the interest rates. "We are analyzing the situation of interest rates, for the moment. There are talks about interests for both loans and deposits and a result is to be announced soon, the company's Deputy General Manager, Petre Bunescu, told Business Standard.

Local lender Banca Transilvania made as much as three interest rate cuts for deposits in the past two months and more such moves are being considered. "Tomorrow [today, ed.n] in the afternoon, we will have talks on the issue. We will probably lower interest rates again, a little," the bank's General Manager, Robert Rekkers, told Business Standard.

Business Standard