Banks raise rates

The rates paid by banks for ROL deposits have gone back up to their early year levels, namely 14-15% annually for one-month maturity for instance, as most of the banking institutions have been raising rates since last week.

After the Romanian Commercial Bank (BCR) announced an increase in the rates for ROL deposits on October 1, other banks have followed suit and changed their interest rate strategies as well, choosing to grant bigger rates for banking deposits. Among these banks, Raiffeisen Bank, Banca Tiriac, Banca Transilvania, Alpha Bank, Banca Romaneasca (Romanian Bank), Banca Daewoo and Banca Carpatica.

The higher rates paid for ROL deposits follow the central bank’s decision to raise the intervention rate by one percentage point, up to 20.25% as of October.

The National Bank is planning to use this measure to reach two immediate goals: more expensive financing so as to slow down the non-government lending growth pace, but also a boost in savings by getting banks to raise interest rates. The central bank can obviously take credit for the latter, given the banks’ rapid reaction and hence the sudden increase in rates. The plunging rates paid by banks for deposits, but also the more relaxed lending conditions have contributed to a bigger-than-expected drop in savings. People saw no point in keeping their money in banking deposits, for rates that barely covered inflation, especially since they could very well use the money as down payment for a loan.

The increasing banking deposit rates, namely the higher earnings derived from a deposit, joined by more expensive financing may help slow down the non-government lending growth, to some extent. Moreover, the National Bank’s concerns with maintaining positive real rates for the banking deposits (above the inflation rate) have been resurrected last month.

oana.nuta@zf.ro