Banks draw deposits of 5.8 billion euros from foreigners

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The banks drew deposits worth 5.8 billion euros from foreigners in July.
The ever rising pressure of drawing financing which would allow them to continue the crediting prompted local banks to resort to ever more sophisticated mechanisms, through which they draw term deposits in lei from shareholders from abroad. The balance of the deposits grew almost 6 fold at the end of 2006 until June, when it reached a historic high of 5.94 billion euros.
 
Practically local banks change the lei they have for euros in cross currency swaps with banks from abroad. Subsequently, foreigners place the drawn lei in deposits in the long run in local banks. If the deposits have maturity terms higher than two years, local banks are no longer forced to set up compulsory minimal reserves, according to the norms of the National Bank of Romania (BNR).
 
In this way, the local bank obtains financing in euros to costs comparable to the ones from international markets, and at the same time, they manage to keep liquidities in lei. The costs pertaining to the compulsory minimal reserves are important, considering the National Bank of Romania imposes local banks to immobilize 20% of the funds drawn in lei (for periods lower than two years) and 40% from the ones in foreign currency – irrespective of maturity.
 
Nicolae Alexandru-Chidesciuc, senior economist at ING Bank stresses that on the local market the competition for the drawing of resources, necessary to continue the crediting activity, has become ever more stronger. The pressures are felt in lei and in the foreign currency alike, and the need prompted banks resort to such complex mechanisms, which allow them to draw funds in euros to better costs and to preserve at the same time liquidities in lei.
 
Chidesciuc stressed that in the total of 5.8 billion euros, speculative investments cannot be included, because generally they have very short maturity terms.
Locally, the loans granted by banks to customers exceed drawn deposits by 10.6 billion euros.
Therefore, local players are strongly dependent on the financing drawn from abroad.
Deposits on the medium and long-term of non-residents accounted for 16% in July from the private external debt worth 36.8% billion euros. At the end of July, the overall foreign debt on the medium and long-term was of 45.3 billion euros, up almost 18% as against late last year.
 
The interests cashed by non-residents from the deposits invested in Romanian banks reported a high jump in July, advancing to 863 million euros (cumulated in the first seven months of the year), after in the first quarter there were only 171 million euros. The sums identified by the National Bank of Romania as service of debt for these deposits oscillated throughout 2008. If in January the value was of 355 million euros, in February it dropped to 138 million euros.
 
For the entire last year, the National Bank of Romania estimates that banks paid to non-residents interest rates of 250 million euros, considering the balance of deposits grew throughout the year from almost one billion to 3.2 billion euros. In 2006, the paid interests totalled 338 million euros, although the balance of the deposit at the end of that year was of only 966 million euros.
 
On the other hand, deposits to local banks have become more attractive since this spring, when the interests in lei exceeded the two-digit threshold, because of the strengthening of the monetary policy. The National Bank of Romania made 7 rises in interests since last autumn, so that the monetary policy rate grew from 7% a year in October last year to 10.25% a year at present.
 
Allowing for the aggressive crediting of the past years, the traditional excess of lei on the interbank market has almost exhausted, so that banks were in the situation of competing to draw deposits and even resorted to BNR for financing loans. The interest rates paid to customers exceeded 11% a year in lei.At the same time, local banks have started to stand out also as regards the drawing of resources in foreign currency, considering their shareholders could not extend they cheap financing and without limitations in volume, allowing for the crisis of liquidities on international markets.
 
The interests have started to go up also for the deposits in euros, not only in lei. At present several players are paying interests of over 5.5% a year for deposits in euros, but on the markets, there have been promotions with levels of over 6% a year.
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