BNR official questions outcome of RO banks exporting excess deposits

Cristian Popa, member of the Board of the National Bank of Romania, speaking during an event, explained that the Romanian banks are "exporting" some EUR 6 bln from their excess deposits, boosted by the households' propensity for saving, to "finance the public deficits of the others."

These resources could be "preferably, used for financing the local economy," he said.

For comparison, before the 2008 credit crunch, the Romanian banking system's external balance was in deficit (net liabilities) of EUR 16 bln.

The standard answer of the bankers would be, at this point, that there are not many bankable companies in Romania, including among others for the weak capitalisation of the Romanian enterprises in general (most of them featuring negative capital).

On the other hand, the big Romanian companies borrow abroad for various reasons, including local lenders' weak ability to provide loans of a certain (high) size.

"We have an excess of deposits versus loans, and we have an excess of bank savings versus bank credit. What happens to this surplus? This surplus generally finances the budget deficit. What is worse is that it ends up financing the budget deficits of other states, and here we have an indicator: the net foreign assets of the private banking system," said Cristian Popa, quoted by Ziarul Financiar.

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