William Davidson Institute Working Paper 402
bank or the bank for development of agriculture, etc. An important role in draining
population savings was held by a specialized institution, which maintained a
privileged status today. The postal service also created its own banking network. It is
obvious now that in the early years of transition, these institutions lack dramatically
the expertise to grant and manage credits in a decentralized economy. Even now, the
shortage of skills is a main limitation of their development. In recent years some of
these banks were privatised (e.g. BRD in 1997, Banca Agricola in 2001), in general
being sold to well-known foreign banks. Some new private banks were also set up,
mostly with foreign capital. And main international banks also opened branches in
Romania, most often in Bucharest, but, for the time being, their credit activity is
rather insignificant, being mostly concerned with portfolio investment. While the
number of registered banks increases every year (they were forty by the end of 1999),
only a few of them dispose of a countrywide network. In addition, there is a notorious
lack of payment instruments (cheques, cards, not to speak of e-banking) and the
payment mechanism is still rudimentary (but much better now than ten years ago). In
the light of these elements, the Romanian banking sector appears quite
underdeveloped. According to UNECE data, in 1999, the proportion of the broad-
money stock to GDP was of only 20.7% in Romania as compared to 42% in Hungary,
48% in Poland and as much as 71.07% in the Czech Republic (this proportion was of
49% in the United States or over 60% in the Euro Zone). In 1999, credit as a
proportion of GDP represented only 12.6% in Romania, as compared to 22.9% in
Hungary, 25.9% in Poland and 59% in the Czech Republic (UNECE, 2001).
6.2 The central bank
The National Bank of Romania is in charge of the monetary and foreign
exchange policy. Its statute defines the main objective of the NBR as “to ensure
stability of the domestic currency with a view to maintaining price stability” (Law
101/1998; Law 156/1999). Every year, the government and the NBR establish an
inflation target, in general agreed with the IMF. For instance, the government target
for 2001 is about 25-27%. Unfortunately, year after year, the target has been largely
missed.
The national currency is the Leu. While the leu is the only currency allowed
for transactions in the domestic market, Romanian private agents (households and
firms) may hold foreign currency denominated deposits with commercial banks.
Although a foreign exchange market was created in 1992, only in January
1997 a full-fledged foreign exchange rate market was set-up and the exchange rates
were unified (UN/ECE, 1997). This unification reduced the government’s room of
manoeuvre for granting implicit subsidies via the official exchange rate.13 By 1999
there were practically no restrictions on capital inflows; yet, outflows by residents
require prior approval by NBR.
13 See Daianu (2000) for a detailed analysis of the 1997 stabilisation programme.
13