January 14, 2014 / 2:06 PM / 4 years ago

Romania c.bank chief eyes lower min. reserve requirements

BUCHAREST, Jan 14 (Reuters) - Romania’s central bank could reduce lenders’ minimum reserve requirements to European Union levels over a period of time “that is not too lengthy”, central bank Governor Mugur Isarescu was quoted as saying on Tuesday.

In a surprise move earlier this month, Romania’s central bank lowered its minimum reserve requirement for liabilities in both leu and foreign currencies, at the same time that it cut its benchmark interest rate to a new record low.

The minimum reserve requirement now stands at 12 percent for lei deposits and 18 percent for those in foreign currencies, down from 15 percent and 20 percent respectively.

They are still the highest reserve requirements in central and eastern Europe and far above western European levels.

“Looking at the real situation in Romania, we believe harmonising (reserve levels to European levels) could be made with small, successive steps during a period that is not too lengthy,” Isarescu told local news agency Mediafax.

“Anyway, when we say harmonising, we do not mean a level of 2 percent, but a consistent close proximity to EU levels.”

Romania began a cycle of monetary easing later than its emerging EU peers due to persistently high inflation. It also postponed cutting its minimum reserve requirements, fearing capital outflows during the financial crisis.

Isarescu said the economic outlook had changed and with fiscal consolidation now underway, Romania could handle deleveraging, as long as it is “moderate and controlled”, with the easing in monetary policy offsetting its impact. (Reporting by Luiza Ilie; Editing by Gareth Jones)

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