2.5 billion lei (about 581 million Euros) was injected yesterday in the banking system by the National Bank of Romania (NBR), with a one-week maturity, at the monetary policy rate, of 6.25%/year. The liquidity injection was performed through a repo operation.

Through repo operations, the NBR provides liquidity to commercial banks and receives government bonds in exchange.

This operation comes almost two weeks after the Central Bank injected about 1.55 billion lei in the banking system (about 362 million Euro).

We are hoping that the news which traveled through press agencies, that the entire amount was injected into just one bank, is inaccurate, because otherwise it would violate the competition mechanism of the market.

Economics PhD Daniel Ionescu said that the latest auction held by the Ministry of Public Finance was a "complete failure, because after assessing the risk of default of the Ministry of Public Finance, the banks weren"t happy with the yield the Ministry was offering", and added:

"In order to stimulate the appetite of the Romanian banking system for participating in the auctions held by the Ministry of Public Finance - to finance public spending by increasing the domestic public debt - the NBR was forced to take over part of the government bonds previously acquired by the commercial banks, offering in exchange a 7-day repo agreement, worth 2.5 billion lei, which would be used by the banks to participate in the auctions to come".

Mr. Daniel Ionescu has explained that the reason for this type of "open market" operations that the Central Bank has performed is "the acute and increasingly chronic lack of budget resources which the government has been experiencing since the beginning of August (in August, < repo > operations performed by the NBR amounted to 3,629.8 million lei) and has been worsened by the fact that the s