Romania’s central bank lowers minimum reserve ratio for foreign currency liabilities

The board of Romania’s National Bank (BNR) decided to lower the minimum reserve requirement ratio on foreign currency-denominated liabilities of credit institutions to 16 percent from 18 percent, starting July, the BNR announced on Tuesday, July 1. This is the second decrease in the minimum reserve ratio for foreign currency decided by the BNR this year after a similar decision in January 2014, when the rate was reduced from 20 percent to 18 percent. This leaves local banks with more resources in foreign currency. This decision comes as the BNR, in May, paid a 0.36 percent interest rate (per year) for minimum reserves in euro held by local banks at the national bank. Meanwhile, the European Central Bank has started to tax banks which keep money in accounts at BCE with a 0.1 percent rate. This makes having large minimum mandatory reserves rates for foreign currency unprofitable for Romania’s central bank. Reserve requirements are leu- and foreign currency-denominated holdings of credit institutions on accounts opened with the NBR. The reserve calculation base is established as the average daily balances of both leu- and foreign currency-denominated liabilities from credit institutions' balance sheets, except interbank liabilities, obligations to the NBR and own capital. BNR also decided to keep the ratio on Romanian leu-denominated liabilities unchanged at 12 percent. The monetary policy rate was also kept unchanged at 3.5 percent per year. Andrei Chirileasa, andrei@romania-insider.com