BNR's Georgescu: Declining financial intermediation has structural causes

Declining financial intermediation has structural causes, and if we relate to the inflation rate and the current account deficit, these are symptoms of an abnormal functioning of the economic body, the first-vice governor of the National Bank of Romania (BNR), Florin Georgescu said on Tuesday in Parliament, at hearings in a joint sitting of the Senate's economic and budget-finance committees.

"What you see, the legitimate concern for declining financial intermediation, is correlated to my opinion, and I am speaking to you not only in the official quality, but also as a professor. I have also recently published a work [in which I say] it has structural causes, fundamental causes. If we are only at the level of the inflation rate and the current account deficit, these are two parameters which, as we all know, are symptoms of an abnormal functioning of the economic body, such as the temperature and the tension. How do we cool them down? Not through ordinances, not through administrative acts, but by changing the lifestyle, the economic behavior and so on," Florin Georgescu said.

He said that although the financial intermediation is low, the banks' profitability, especially in 2018, was high. It came from the fact that their provisional expenses were reduced. Banks reduced the volume of provisions because they improved their loan portfolio, but also because the Government intervened and imitated the possibility of introducing provisions on loans that deteriorated from a qualitative point of view.

The BNR official explained that in Romania things were not dealt with in the same way as in other countries, where the banks were helped with money, capitalizing and nationalizing them, but we had a generous regime that allowed banks to deduct all their provisions in full.

Georgescu also said that banks are earning high revenues from the interest rates that are part of the operating income, which represent the difference between the interest paid on deposits and the difference of interest rates charged for loans. AGERPRES (RO - author: George Banciulea, editor: Nicoleta Gherasi; EN - author: Bogdan Gabaroi, editor: Simona Iacob)