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Banks "did not understand anything" from what the governor said

BNR adviser, Adrian Vasilescu, says that banks "did not understand or they pretend they did not understand" the message of the Central Bank Governor on the interest rates on loans.

Articol de Mihaela Mihai, 10 Iulie 2013, 11:05

BNR adviser, Adrian Vasilescu, argues that banks "did not understand or they pretend they did not understand" the message of the Central Bank Governor on the interest rates on loans.

The National Bank governor’s advisor, Adrian Vasilescu, said at Radio Romania News that "everyone would benefit" if bankers would implement the lower lending rates.

Lower interest rates on loans would have been stimulated, according to BNR governor Mugur Isarescu, by the recent decision of the Central Bank of lowering the policy rate from 5.25 percent to 5 percent.

"The Central Bank gave the signal to reduce the lending rates.

"Banks need to see that this trend is sustainable," said Isarescu a few days ago.

Meanwhile, the dialogue between the central bank and commercial banks appears to have been continued.

"The governor gave this very clear message," said Adrian Vasilescu at Radio Romania News.
"He said that interest rates are high.

"They pretended they did not understand, their reply was that we reduce the interest rates when the market is telling, not when the National Bank say it or when is required by someone.

"And we, from the National Bank, said that they did not understand anything that the governor said, that the governor did not instruct them to lower the interest rates.

"He did not tell them that the National Bank asks to lower the interest rates. He said an entirely different thing and they either did not understand or they pretend they did not understand.

"He said that, if the interest rates are high, these will turn against them like a boomerang and will strike them suddenly," said Adrian Vasilescu at RRA.

Contacted by the RRA Online, Chairman of Romanian Banking Association, Radu Gheţea, refused to comment on adviser Vasilescu’ statement.

What the policy rate is


The policy rate is the interest on which commercial banks borrow from the Central Bank. The ceiling of 5 percent per year is now the maximum rate that the Central Bank lends to commercial banks.

When the monetary authority - namely the National Bank – lowers the policy rat, it stimulates the interest for request and refinance of banks to more loans.

In other words, commercial banks have access to cheap money as the monetary policy interest rate is lower. Having access to cheap money, commercial banks could theoretically give themselves low-interest loans, maintaining the rate of profit.

Translated by Alexandra-Diana Mircea
MTTLC, Bucharest University

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