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Romanian Central Bank Warns About High Deposit Interest Rates

Feb. 7 (Bloomberg) -- Romania’s central bank warned local commercial banks to avoid paying interest rates that are too high as they battle to attract deposits to make up for dwindling support from their parent institutions abroad.

Interest rates of about 7 percent for lei deposits and about 4 percent for euro deposits “are a mistake’’ and contradict the path of the monetary policy, central bank Governor Mugur Isarescu said in a speech in Bucharest today.

“As a supervisory board, you start to think about where will they place this money,’’ Isarescu said. “We told banks that the deposit fight they were planning to start at the beginning of the year is wrong and they need to place their money intelligently.’’

Isarescu said he expects significant changes in bank balance sheets starting this year as the focus shifts to attracting local resources instead of funding from their parents. Some banks may also reduce lending because of a lack of resources, Isarescu said, adding that the bank is taking measures to lower borrowing costs, “which are still too high.’’

Erste Group Bank AG, BRD-Groupe Societe Generale SA, Raiffeisen Bank International AG and UniCredit SpA have units in Romania. Banca Transilvania SA and state-owned CEC are major domestic banks. Oesterreichische Volksbanken AG kept its Romanian unit when it agreed to sell most of its eastern European business to OAO Sberbank in September.

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To contact the reporters on this story: Andra Timu in Bucharest at atimu@bloomberg.net;

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net

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