Stock of forex deposits in Romanian banks rises sharply amid COVID-19 crisis

The stock of deposits in Romanian banks increased by 2.2%, or by RON 8.2 billion (EUR 1.6 bln), in March to RON 376 bln (EUR 77.9 bln) at the end of the month, according to data reported by the [National Bank of Romania](The stock of deposits in Romanian banks increased by 2.2%, or by RON 8.2 billion (EUR 1.6 bln), in March to RON 376 bln (EUR 77.9 bln) at the end of the month, according to data reported by the National Bank of Romania (BNR). Notably, deposits denominated in foreign currency increased by 6.4% (RON 8.3 bln or EUR 1.7 bln) as both households and companies placed their savings in foreign currency deposits. The flight to safer currency amid rising uncertainty could explain the unusual rise in the stock of foreign currency deposits. The stock of local currency deposits marginally declined in March. The loans edged up by only 0.6% during the month, to RON 273 bln (EUR 56.5 bln). Thus, the loans-to-deposits ratio, which hit 110% during the first years after the 2008 credit crunch, plunged at the end of March to the past decade’s low (72.5%). This means that banks are holding resources that they are not returning to the economy as loans. The annual growth rates for loans and deposits were 6.9% and 13.6%, respectively, at the end of March, compared to 3.9% and 6.4% respectively projected by the country’s leading lender Banca Transilvania as the average annual growth rates for 2020-2022.) (BNR).

Notably, deposits denominated in foreign currency increased by 6.4% (RON 8.3 bln or EUR 1.7 bln) as both households and companies placed their savings in foreign currency deposits.

The flight to safer currency amid rising uncertainty could explain the unusual rise in the stock of foreign currency deposits. The stock of local currency deposits marginally declined in March.

The loans edged up by only 0.6% during the month, to RON 273 bln (EUR 56.5 bln). Thus, the loans-to-deposits ratio, which hit 110% during the first years after the 2008 credit crunch, plunged at the end of March to the past decade’s low (72.5%). This means that banks are holding resources that they are not returning to the economy as loans.

The annual growth rates for loans and deposits were 6.9% and 13.6%, respectively, at the end of March, compared to 3.9% and 6.4% respectively projected by the country’s leading lender Banca Transilvania as the average annual growth rates for 2020-2022.

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