The solutions given by The National Bank of Romania to the international financial crisis and their effect Author: Horia Mircea Botoş

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In my opinion, the financial crisis which is manifested in the international has been effectively controlled by the central bank. All measures were taken to protect the economic-financial and banking environments, but they have not always had the desired effect entirely. An example is the increase of the minimum banking reserves requirements, although it wanted to protect the banking system led to a decrease of the trust population. This was caused by: the exchange rates and the crisis ‘importing’. Exchange rate fluctuations were unpredictable. Importing the crisis, referred to the fact that our country did not manifest typical crisis symptoms, but has suffered from the crisis of the origin countries of the foreign investors has contributed considerably to the appreciation of our national currency.

Until now all the solutions chosen to be put on the table by the central bank, namely limiting lending and monetary policy, have succeeded although they were contested by the economic environment. Limiting lending was a strong measure, which was caused by the increasing number of bad loans and fear of lack of liquidity caused by massive extraction of funds of foreign investors. Adding that most bad loans were granted in currencies and volatility of the exchange course did only increase the number of bad-loan payers during the international financial difficulties. The interest rate of the monetary policy has been increased in an attempt to withdraw cash from the market, in a try to stabilize the exchange rate fluctuations.

As highlighted by the Larosiere report, both Romania and the European Union were not ready to face the crisis. But our country had the advantage that because the Central Bank has forecasted such a crisis scenario, trying to protect the population since 2004 to this day.

During this year NBR concluded that the negative psychological effect of the crisis is ending, and now is trying to relaunch the economic. Ways of relaunch chosen are those opposite of protective ones, namely the decrease of interest rate monetary policy and the increase of lending. The first with the role of giving cash in the market for investments, the second aimed at helping the enterprises to pay their debts and develop.

One thing I noticed is that the central bank maintained a method of protection, that of attempting to stabilize the exchange rates. A justification, in my point of view, is that Romania wants to access the exchange rate mechanisms in 2012. And if all goes well staring 2014, Romanian will start using the euro.

Because of judgments and decisions in opportune moments of the central bank, Romania had a great chance to have a variety of opportunities after the crisis. These opportunities are both economic and social. The crisis was an introduction, preparing our country to face these opportunities and opening the population’s horizons.

With the exiting from the crisis, it is seen that the national bank took visionary actions. Had I been NBR Governor, I would have chosen the same steps in order to protect and relaunch of the economy, putting a much more significant increase in the control of exiting foreign capitals from the country. Limiting the drain of cash from our country, thus the importing of the crisis wouldn’t have been on same scale.

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