​In 2022, the banking system made a record profit of 10.2 billion lei for Romania, which this year “will be significantly exceeded”, among other things, and because in the first four months of 2023 banks increased the interest margin on loans and the Offered interest deposit rates, Valentin Lazea, chief economist of the National Bank of Romania (BNR), said on Wednesday, Agerpres reports.

“In 2022, the banking system had a record profit for Romania of 10.2 billion lei, more than 2 billion euros – and which will be significantly exceeded this year. And how will it be exceeded? Among other things, because in the first four months of this year, banks increased the margin between interest on loans and interest on deposits,” he said.

• “Here, while during the first four months of the year the BNR increased monetary policy interest rates by 25 basis points, commercial banks, speaking for the whole system, increased interest rates on loans in new lei by 41 basis points, more or less accordingly, but they lowered the interest rate offered on newly created deposits in lei by 53 basis points. So it’s clear that more profit comes from this increased margin.”

In his opinion, “such applied tactics” are not beneficial to anyone for at least three reasons, one of which is that “monetary policy signals are not transmitted in the same way as the world.”

“Why do I say that this tactic is not beneficial to anyone? Well, the banks will say, Sir, don’t argue with us, talk to our shareholders, because they want us to make a profit, they want a dividend. I do not argue with those ahead. I scold your shareholders. Why am I telling shareholders this is bad?” Lazea said.

According to him, this is not good from the point of view that monetary policy signals are transmitted differently than the rest of the world. Monetary policy, when interest rates are rising, wants to reduce excess demand in the economy. And how to do it? In two ways: first, by making lending more expensive, and second, by encouraging better savings, i.e. non-consumption.

“What does excessive demand mean? In our country, excessive demand should not be considered in an absolute sense, because the demand is absolutely high. It is excessive compared to the supply of services and products that the Romanian economy is able to provide. , when I say excessive demand, the demand is not extremely high, but it is high compared to the supply of goods and services that Romania can offer. Thus, this gap between demand and supply can only be solved by increasing supply, by no means stimulating demand. If you stimulate demand, you will have a larger budget deficit, you will have a larger current account deficit, you will have higher inflation, etc.,” explained the chief economist of the BNR.

According to him, if commercial banks do not accept the BNR’s signal regarding deposits and do not increase the interest rate to encourage people to save more, the BNR’s message is “lost in nothing”.

“The second negative aspect is that the banks will say: yes, sir, we are no longer interested in encouraging people to save, that we have too much money. We have more deposits than loans, and it’s not our fault, because we Are there not enough profitable projects in Romania. And they are right,” he said.

• “However, people continue to save in banks in the first place. Over the past six months, deposits have increased more than the rate of inflation, the population continues to go to the banks, and the desire of the banks to prevent people from coming to the banks with money is not solved. , here the reward that people get is reduced, which is crazy, completely.”

In his opinion, with significantly increased profits compared to last year, banks will become, including in Romania, a favorite target for politicians in the context of the 2024 election year.

“It’s that banks don’t reward depositors enough, unfortunately, it’s not just Romania. I recently saw a speech by Luis de Guindos, a Spaniard from the European Central Bank (ECB), who scolded the commercial banks in the Eurozone, saying that interest rate increases should not only be on the lending side, but also on the depositor side. So what are these bad habits not only here, they are also in Europe,” added Valentyn Lazeya.