The foreign debts of the banking system exceeded 11 billion euros at the end of November 2006, after having surged by around 41% from the level registered in 2005. At the same time, foreign assets dropped although they were already incomparably smaller than liabilities.

Therefore, at the end of November, foreign financing lines contracted by banks increased to a value almost ten times higher than that of foreign assets. In the first eleven months of 2006, the domestic financing accumulated by commercial banks increased by only 19.4%, totalling 34.5 billion euros. Whereas the foreign balance was completely uneven, domestically banks' assets at the end of November totalled 45.2 billion euros, that is more than 10 billions higher than liabilities.

Banks resorted to foreign financing increasingly more often in order to be able to grant loans in both foreign and domestic currency, particularly because the National Bank capped foreign currency lending in the autumn of 2005. Under the circumstances, the banks' actions contributed to the pressures for a RON appreciation, besides boosting foreign currency lending. It was not until 2006 that the effects of the restrictions imposed by the central bank started surfacing and commercial banks started increasing interest rates for raised resources, in an attempt to secure higher RON liquidity volumes.

Nevertheless, the volume of foreign liabilities continued to expand at a fast rate in the autumn of 2006, registering a growth of 285 million euros in a single month.

Under the circumstances, domestic banks' exposure was largely focused abroad. This happened as a series of major banks resorted to loan "exports", which were registered directly in the balance sheets of parent companies, generating a distorted image of banking assets that were reported back to the central bank.

Domestic banks in many cases b