Romanian banks comply with the national legislation regarding the way in which the ROBOR reference index is established and conduct themselves in accordance with competition rules, this representing a permanent and priority concern at the level of the banking community, the Romanian Association of Banks sent on Thursday, in a statement.
“We are confident that the authorities' final review will confirm that the banks have consistently acted in good faith, in accordance with the applicable legal and regulatory framework, as well as the rules and methodologies established by the competent authorities,” says the ARB.
We remind you that Competition Council officials are investigating the banks that allegedly agreed to keep the ROBOR (the interest rate at which banks lend to each other, and which influences your credit rate) artificially high. A few days ago even the governor of the BNR had come out publicly in support of the bankers.
What the banks say through the ARB
“I didn't do anything illegal” – everything went according to the rules, the BNR supervises the market and has not sanctioned anyone.
“Interest rates have risen all over the world” – not only with us, and that because of inflation, the war in Ukraine, the energy crisis – not because of us.
“Just because we have similar interests doesn't mean we get along” – we all react to the same market conditions, it is normal to reach close values.
“Be careful what you say in public” – these accusations, even unproven, can destabilize the financial market and make loans even more expensive.
“This was also investigated in 2008” – nothing came out.
“ROBOR is too important to play with” – it is used by the state, companies and the population; if you break it or block it, everyone suffers.
The National Bank of Romania has the role of organizer, regulator and supervisor regarding the functioning of the money market, according to Norm 4/1995 regarding the functioning of the interbank money market. The money market involves the trading of liquidity. Legislation imposes strict criteria for participation in this market, and the organizer establishes the trading rules at the market level and the transparency rules regarding the quotation mechanisms. In its capacity as supervisor of this regulated market, the National Bank of Romania orders, in accordance with European Union Regulation no. 596/2014, of the legislative framework necessary for the prevention of market abuse related to the manipulation of reference indices, the ARB press release also states
At the level of the Association, we have no information that the banks have been sanctioned for any reason related to the way in which they respected their obligations regarding the listing or that the BNR has been notified in the context of the European regulation.
The manner in which the subject was presented in the public space created confusion regarding the functioning of a regulated market, bankers say. Until the mechanisms of this regulated market are fully clarified and understood by the public, the allegations can trigger negative operational, legal, funding and reputational shock consequences. These can lead to affecting financial stability, especially in the case of the loss of representativeness or blocking of the ROBOR quotation, with a direct impact on the economic, business environment and the entire population, says ARB
In the context of the ongoing investigation, the bankers emphasize the need for any conclusion to result exclusively from a full, evidence-based analysis. “In the case of topics with a systemic impact, assessments or anticipated conclusions can generate effects that go beyond the scope of the investigation and negatively influence the operation of the market and public perception. It is essential that the public debate on this indicator is carried out with maximum rigor and responsibility. Protecting the uninterrupted operation and representativeness of the ROBOR index is not just a technical approach, but is imperative to ensure financial stability,” the statement reads.
ROBOR has a primary role in the transmission of monetary policy and the functioning of the money market
The fixing process is rigorous, being based on real liquidity quotes from the interbank market, with the supervision of the National Bank of Romania according to strict rules. The institutional framework is very well defined and subject to monitoring and control mechanisms, including at the European level. Market participants must meet rigorous conditions and comply with strict regulations, given their essential role in ensuring financial stability and access to finance by employers and public entities.
The general increase in interest rates starting in 2022 is not a local phenomenon, and the amplitude of these increases depended in each state on a number of macroeconomic factors, such as inflation, fiscal deficits and the structure of the economy. None of these factors can be influenced by the behavior of local banks by how they quote the cost of interbank funding.
The current investigation by the Competition Council was launched in 2022, when Romania faced multiple crises such as record inflation after the pandemic period, the energy crisis, the security crisis against the background of the war in Ukraine, etc. The factors that influence the evolution of ROBOR are directly related to macroeconomic imbalances, the level of the inflation rate and the monetary policy interest, the need for liquidity, the perception of rating agencies and financiers in general, as well as political and governmental instability.
The ARB believes that each banking institution under investigation independently sets its pricing strategy and quotes based on its own risk and funding cost analyses. The similarity of quotations at certain times does not represent an agreement, but a normal reaction of some economic actors operating under the same market pressures.
The crossing of periods marked by the amplification of risks in the year of the launch of the Competition Council's investigation, with a record inflation rate after the pandemic period, of 16.8% in November 2022, reflects the slippages determined by the manifestation of risks and we believe that they cannot be assimilated as understandings between credit institutions.
At the time the investigation began, ROBOR 3M was located at half the rate of inflation
. The fundamental objective of the National Bank of Romania is to ensure and maintain price stability, so in the conditions of a record inflation rate after the pandemic, the BNR had to increase the monetary policy interest rate 8 times in 2022, from 1.75% in 2021 to 6.75% at the end of 2022.
In 2008, the Competition Council launched a similar investigation on the credit institutions active on the interbank money market in Romania regarding the establishment of the ROBOR and including the way these platforms operate. The Romanian Association of Banks is not aware of any deficiencies of a competitive nature having been reported, given that the rules of operation and the platforms used have not undergone significant changes.
The Romanian Association of Banks reiterates that allegations regarding the operation of ROBOR, which is a market landmark with a systemic function, should be treated with utmost caution. The accusations affect the confidence of foreign investors with an impact on the financing costs of the state, the population and companies. Any kind of actions that modify or affect the operation of the mechanism may in fact represent a de facto regulation of a market infrastructure, with the potential for conflict between the current regime applicable to the money market/benchmarks and competition law instruments. Any exogenous intervention that affects the ability to ensure a functional money market framework can be interpreted as affecting institutional autonomy.
The Romanian Association of Banks offers its technical support for clarifying any aspects regarding the functioning of the financial markets, considering that the evolution of the ROBOR index is determined by the fundamentals of the money market, not by agreements between banks.
