ING report: Major cash deficit in the Romanian banking system

According to a report of ING Bank Romania, the monthly bulletin issued by the National Bank of Romania (BNR) proves that the cash deficit has significantly deteriorated in December, because banks took each day RON 4.1 bln from the Central Bank, reports. According to the report, this is the most acute liquidity deficit since 2009, when episodes of severe pressure were registered on the money market, and it might come as a surprise, because short-term interest rates had an important decline in December. “Our explanation for this odd combination is that the state bonds issues conducted in December, purchased by a small number of primary dealers, were largely financed through the operations on the monetary market arranged by the Central Bank on a regular basis (with the result being the increase of the sums borrowed by banks from BNR), while many other bond holders were confronted by an increase of liquidities because they did not refinance (probably on important scale) the bonds that reached maturity,” reads the document signed by economist Vlad Muscalu. The liquidity of the system further improved, probably because of high expenses made in December, based – among others – on the sums attracted through state bonds issues financed via operations conducted by the Central Bank on the monetary market.

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