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March 3, 2021
BUSINESS

Governor Isarescu: Cyprus situation will not happen in Romania

After the central bank monetary policy meeting yesterday, the Governor of the National Bank of Romania (BNR), Mugur Isarescu, reassured that the situation in Cyprus would not happen in Romania. ‘There are no similes between the situation in Cyprus and the situation in Romania. Not only are there no similes, but there are actually major differences. The entire Romanian banking sector accounts for approximately half of the GDP. In Cyprus, on the other hand, it is some eight times bigger than the GDP. Our banking system would have to grow by 14 times more or less, quickly, and the GDP would have to be the same. When Romanian banking industry grew from 20 per cent to 40 per cent of the GDP, from 2005 to 2008, it grew by 4 or 8 per cent per year. They are as like as an apple to an oyster. Major differences are also when it comes to the fiscal situation.

Romania is out of the excessive deficit situation, Cyprus is not, Romania has under 40 per cent public debt, Cyprus has 80 per cent going on 100 per cent and the Cypriot budget is unable to support banks that are several times bigger than the budget and which count on foreign flows of money. There is no such thing in Romania’, Isarescu said. According to the central bank governor, Romanian banks are well capitalised and the capital base has also been increased in the past few years. He further noted that Cypriot banks hold together 1.3 per cent of the local banking system and about 0.6-0.7 per cent taken separately.

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