Central bank vice-governor: Liquidity far lower in Romania at crisis onset

Vice-governor of the National Bank of Romania (BNR) Cristian Popa considers that the onset of the economic crisis found Romania with a liquidity far lower than today, and the correction operated through government securities has, to a certain extent, dispelled market tension.

'The start of the crisis caught us in a situation where liquidity was far lower than today. The correction operated through government bonds reduced the tension, but the segmentation persists,' Cristian Popa told a colloquium on Tuesday. He mentioned that a tighter relationship between the central bank and the other banking institutions is not necessarily 'important' in the current context.

'Although a closer relationship with the central bank is sought, this is not necessarily important. We do not need to be onlookers in a flawed situation, but we must see how to resolve it. We have a financial system based on foreign players, but we must also take the monetary policy into acount,' said the BNR vice-governor.
 
The market is far from optimal in terms of liquidity

The market is far from optimal in terms of liquidity, Vice-Governor of the National Bank of Romania (BNR) Cristian Popa told a conference on monetary policy on Tuesday in Bucharest. 'In an economic research landscape of monetary policy, the next step is discovering new things. After 20 years, some monetary policy concerns remain in the same areas, and liquidity is one of them. Market liquidity is highly volatile. The market is far from optimal in terms of liquidity,' said Popa.

He added that BNR did its best to prepare the credit institutions to keep their liquidity intact.

'The main economic weapon of the 1960s was the absence of micro-fundamentals. In the 1990s, behavioural modelling brought about more significant modifications. BNR has tried to prepare the credit institutions to switch from liquidity surpluses to diminishing liquidity, which was dramatically put on display by the events of October 2008, with the outbreak of the financial crisis,' said Popa.

He added that the rekindling of the crisis once again cast light on the actual interface between the financial sector and real economy, on economic transmission and the connection between orthodox economy and the explored elements that were not fully implemented, such as the credit channel.

BNR on Tuesday hosted its third conference on monetary policy that discussed real and nominal rigidity in Romania's economy and tenacious inflation.The colloquium takes place at the central bank headquarters and is devoted to 'Monetary Policy Challenges.' The subjects approached include the banking system's liquidity, real and nominal rigidities in Romanian economy, the persistence of inflation.

Attending the conference were BNR Governor Mugur Isarescu; BNR senior economist Valentin Lazea; Deputy Director of the Monetary Policy and Macroeconomic Modelling Department of the BNR Dorina Antohi; head of the Monetary Policy and Macroeconomic Modelling Department of the BNR Cezar Botel; BRD Groupe Societe Generale Director General Claudiu Cercel; ING Bank senior economist Nicolae Chidesciuc; BCR senior economist Lucian Anghel and Bancpost EFG senior economist Dan Bucsa.