THE REFORM OF NATIONAL BANK OF ROMANIA AFTER ACCESSION TO EU: CHALLENGES AND PERSPECTIVES

In January 2007, Romania had become a member of the European Union and the National Bank of Romania a member of The European System of Central Banks (ESCB). This event was a confirmation of the success of Romanian reforms, but, on the other hand, it was a beginning of a new stage in the process of accomplishing the nominal and real convergence conditions, set in the Maastricht Treaty. In this study we have done some considerations about the NBR's reform performances before and after EU accession and, also, we have talked about the main challenges and perspectives for Romanian central bank in the new economic environment imposed by the integration process.European integration, central bank, reform, challenges, perspectives

EXTERNAL FACTORS INFLUENCE ON INFLATION: THE CASE OF ROMANIA

In this paper we try to assess the main external determinants of inflation dynamics in Romania. The literature in the field of measuring inflation dynamics is wealthy and various. There are many developing country - level studies that examine inflation dynamics: Blavy (2004) - Guinea, Duma (2008) - Sri Lanka, Gottschalk et al (2008) - Sierra Leone, Moriyama (2008) - Sudan, Mwase (2006) - Tanzania, Williams and Adedeji (2004) - Dominican Republic, Hossain (2005) - Indonesia, Almounsor (2010) - Yemen. The issue of Romanian inflation dynamics is present in many and various studies, like Hammermann (2007), Pelinescu and Dospinescu (2006), Budina et al (2006) etc. There are no other recent studies that analyze the external determinants on Romanian inflation dynamics. In our paper we estimate an OLS single equation model, using a methodology derived from Almounsor (2010). The empirical analysis uses monthly data from August 2005 to January 2011. The start point of the data series is the moment of a major change in the National Bank of Romania (NBR) monetary policy: adoption of the inflation targeting regime. The independent variables used in our research are: harmonized consumer price index of EU-25 countries, EUR/RON exchange rate, crude oil price index (for analyzing the external shocks effect) and M2 monetary aggregate (intermediate money supply) as a control variable. The outcomes suggest that inflation in Romania is driven mainly by international price shocks - harmonized consumer price index of EU-25 countries. The EUR/RON exchange rate depreciation has a small influence on domestic inflation. In the short run, the effect of the international oil price is insignificant. Money supply, used here as a control variable, is shown to have a very small effect on inflation in Romania when using OLS regressions. The results show that 66% of the domestic inflation variance is explained by the independent variables in our model.inflation dynamics, external shock, international prices, exchange rate, Romania

FINANCIAL SUPERVISION STRUCTURE IN ROMANIA. A COMPARATIVE APPROACH

In this paper we assess the financial supervision and regulation structure inRomania. To this purpose, we calculate and interpret the Financial Supervision UnificationIndex (FSU Index) and the Central Bank as Financial Authority Index (CBFA) at the level ofthe year 2011 (August), according to Masciandaro‘s methodology (2004) for all EU27member countries in order to make comparisons with the Romanian ones. We propose achange in the present Romanian financial supervisory regime from the silos model to a hybridone, arrangement that supposes a combination of the sectoral model with the objectives-centred model.central bank, financial stability, Romanian financial supervision and regulation structure,the FSU Index, the CBFA Index

LIMITS OF ECB MONETARY POLICIES ON ADJUSTING MACROECONOMIC SHOCKS

: In this paper we intend to highlight the limits of ECB in managing the macroeconomic shocks in the Euro zone. We consider that in the last months the ECB monetary policy rate loses its effectiveness and, consequently, should be offset by other measuresinflation, Euro zone, European Central Bank, monetary policy, macroeconomic shock

COMPETITION IN ROMANIAN BANKING SECTOR

Recent turmoil in the global financial system has impacted severely on the banking sector with many banks suffering large losses and necessitating the need to raise additional capital privately or through their respective national governments. In our study we investigate the impact of structural reforms performed throughout the European Union (EU) accession process on competition and contestability of banking systems in Romania. The literature of the measurement of competition can be divided into two major approaches: structural and non-structural. The structural approach to the assessment of competition embraces the "Structure-Conduct-Performance Hypothesis" (SCP) and the "Efficient Structure Hypothesis" (ESH). The structural approach, as the name suggests, assesses bank competition by examining measures of market structure such as concentration ratios (the share of assets held by the top 3 or 5 institutions) or indices (e.g., the Herfindhal-Hirschman index) and supposes that higher concentration in the banking market causes less competitive bank conduct and leads to higher bank profitability. The SCP model is originally developed by Bain (1956). The second approach, ESH, developed by Demsetz (1973) and Peltzmann (1977) suggests that the superior performance of the market leaders determines the market structure, implying that higher efficiency produces both higher concentration and greater profitability. The non-structural indicators of competition are mainly based on the measures of monopoly power developed by Lerner (1934). The Lerner Index suggests the mark-up of price over marginal cost. An alternative non-structural indicator of the degree of market competition is the Panzar and Rosse (1987) H-statistic. The H-statistic measures the extent to which changes in banking costs are reflected in changes in banking revenues. In order to examine the level of competition and market power of banks in Romania for period 2003 - 2009, we estimate the non-structural indicators and compare it with the structural indicators of competition. In particular, we measure competition using Lerner index and the H-statistic, indicators what are estimated using bank-level data and are compared with a standard market structure measure of concentration like HHI and CR5. There are no other studies that measure both structural and non-structural competition indicators for Romanian banking sector. Also, our assessment contains a period of seven years including the begging of the implications of the present international financial crises on Romanian banking sector.The structural indicators show continuous increase of competition in the Romanian banking system. Lerner index and H statistic demonstrate that Romanian banking system is characterized by monopolistic competition and relatively competitive practices. Personnel cost, operational cost and financial cost are statistically significant at conventional levels, which imply good fit of the revenue equations. The results also demonstrate that excess fixed assets do not generate abnormal revenue.bank competition, Lerner index, H statistic, structural indicators, Romanian banking system

Romanian banking competition. A new structural approach

In this work, we evaluate the competition in the Romanian banking system as regards the distortions in terms of market shares and the origin of capital, for the period 2000-2010, using the methodology of the structural analysis of the markets promoted by Mereuta (2012). Thus, we firstly check the features of structural distributions of the market shares in the case of the Romanian banking system, in the period 2000 2010; then we apply the Mereuta universal concentration matrix (2012) where we analyse the competition on the Romanian banking market, using two indicators: the M index and the degree of the structural dominance of the market leader (Gdl), and finally we conclude a "nodal" analysis of the Romanian banking system. Our approach demonstrates that all the structural peculiarities of the distributions of macro-experiment are confirmed in the Romanian banking system during the period 2000 - 2010 and that, in the period under review, the competition has continuously grown on the Romanian banking market, in particular due to the phenomenon of penetration of foreign capital. The distortions of competition in the light of the origin of the capital show that the penetration of foreign capital also increased its vulnerability and the risk of contagion. As regards policy recommendations for regulatory and supervisory authority, we suggest a very careful monitoring of soundness of all foreign banks, not only those from nodal countries; a close collaboration of National Bank of Romania (NBR) with the regulatory and supervisory authorities in the countries of origin of foreign banks branches; as well as a higher emphasis on the conduct of business of the banks and consumer protection. As for the banks management, we recommend that the stability of banks should be the main concern, rather than the preservation or increase in market shares

Competition and market power in the Romanian banking sector

The current paper analyses the competition degree among Romanian banks during 2005-2015. We determine the bank-level competition for loans and deposits using efficiency-adjusted Lerner index, while Boone indicator shows how competitive these two markets are. Marginal costs (MC) are estimated with a Fourier flexible form cost function with two bank products, that generate the largest portion of revenues, (i.e. loans and deposits) and three input prices (i.e. labour, funds and physical capital). We use DFA for efficiency-improved Lerner index and Generalized Method of Moments with one-, two- or three-year lagged values of marginal costs as instrumental variables for Boone indicator. The results are compared to the values of HHI and C5, provided by European Central Bank. Overall, bank competition in Romania improves as a direct result of decreasing market power and concentration. On the loan market, we can notice that starting with 2014 banks have changed their behaviour by focusing more on optimizing their portfolios through a complex process of balance sheet cleaning, instead of acquiring additional market share and be more competitive

Changes of Executives and Ownership in a Romanian Small Bank: an Event Study Approach

The aim of this paper is to study the impact of four different events on the evolution of stock prices of Banca Comercială Carpatica, using event study methodology. The series of events ended with a substantial change of the bank ownership. In determining the expected returns, we employ two different models: Market Model and Capital Asset Pricing Model (CAPM). Our results show that in three out of four events there is a significant impact of the event, both in the pre- and in the post-event days from the event window

The Impact of International Financial Crisis on Bank Performance in Eastern and Central European Countries

In this paper we investigate the determinants of bank profitability in 10 countries from Central and Eastern Europe, in the period between 2004 and 2013. We proxy the profitability of banks with more commonly used ratio: the return on assets (ROA), computed as a ratio of the net profit to the total bank assets. We used multiple regression with bank specific variables, banking industry variables and macroeconomic variables. Moreover, we added a global financial crisis dummy to highlight the crisis impact on asset return. OLS is the main estimation method, but we also used difference-in-difference in order to test if the crisis impact was amplified or diminished by the bank specific characteristics. The evidence shows significant differences between the profit levels of the CEEC banks. Our results are in line with the empirical literature. The impact of the international financial crisis on ROA was negative and statistically significant, as expected. The second part of the analysis we separate the banks sample in three categories: banks with high capital adequacy, large banks by total assets and foreign-owned banks. Our findings show that the three selected variables both amplified and decreased the crisis effect

THE ROMANIAN BANKING COMPETITION AND THE ACCESSION TO EU

In this study we try to assess banking competition in the Romania for 2001 – 2008, taking into account the evolution of market share of the top five, Herfindahl-Hirschman Index (HHI), performances indicators like ROA and ROE and evolutions of deposit and loans rates. We observed that the competition in the Romanian banking system increases continuously in the last years. The main factors which have influenced this process were: the privatization of the majority of state capital banks and the perspective of accession of our country in the EU. In the period assessed, there are two approaches: in the first period banks have had very good performances due to their market share in a low competitive banking environment and after the privatization of some state capital banks, the leader of the market lost market share in the favor of other bank with greater performances