The peak of tensions generated by the COVID-19 crisis in the monetary, banking and financial field has been overcome. Whereas in the 11-20 March 2020 period, the cash withdrawals of credit institutions from the NBR for the purpose of meeting household and corporate demand reached a record high of lei 4.4 billion (twice as much as in December 2019, the winter holidays season), they have declined sharply over the past few days. The value of vault cash held by credit institutions has increased, meaning that they can now cover from own sources the cash requirements for making payments and smoothly feeding the ATMs.
The NBR’s cash reserve fund has remained within the prudential limits and has risen slightly during the past days. There are currently no bottlenecks in meeting cash demand in lei. The NBR recommends however that, in this period, companies and households should use cashless payment instruments to the largest extent possible. With regard to ensuring the cash requirements in foreign currency, the discontinuities came from both high demand and the suspension of some international flights. The situation is in the process of returning to normalcy. The Romanian banking system is sound, functioning at liquidity and solvency parameters above the European averages, and the payment system has worked flawlessly.
Even if the financial and banking system recorded a liquidity surplus overall, the preference for liquidity specific to crisis periods led, in the days immediately following the proclamation of the state of emergency, to temporary and isolated bottlenecks in the financing of budget expenditures and of the real economy, as well as to some interest rate hikes, especially on the money market.
After the announcement of the monetary policy measures decided by the NBR Board, liquidity flows smoothened significantly, due inter alia to the bilateral operations conducted by the NBR, the financing of public spending went on seamlessly, while interest rates decreased considerably. The leu’s exchange rate stabilised within a 1 (one) percent range, with a slight appreciation trend in recent days, which prevented an increase in government spending on the financing of foreign-currency public debt and necessary imports during this period and, on the other hand, alleviated expectations of a worsening of the macroeconomic picture.
The NBR staff have been working in emergency conditions since the beginning of March 2020, according to the business continuity plan specific to central banks within the European System of Central Banks. Our main objective is now to preserve the regained stability while also providing the necessary liquidity for the smooth financing of budget expenditures, real economy and households. To those on the front line of the fight against the invisible enemy – medical staff, the military and Ministry of Internal Affairs personnel – we convey not only our gratitude, but also our firm promise of a priority and uninterrupted coverage of liquidity needs, in both domestic and foreign currencies, for the financing of the operations ensuring what is needed in their activity. We take this opportunity to thank our colleagues in the Ministry of Public Finance and in the banking system, with whom we have cooperated and continue to do so for the achievement of the mentioned objectives.