The Romanian banking must be granted a transitional period in the banking union, during which time it would apply prudential regulations stricter than the ones of the EU, Bogdan Olteanu, the vice-governor of the National Bank of Romania (NBR), said yesterday in a conference.

He also said that the banking union will represent a mechanism for relieving the operating burden of the European Union, will increase the credibility of the EU as a unified market and will break "the unfortunate tie" between sovereign debt and the banking system.

The NBR official explained: "The banking union will result in a leveling of the perceived risk of the banks in the Banking Union, which means that the costs of the Romanian banks would get closer to the borrowing costs of the strong core of the European Union. It is however a long lasting process, a process of reinforcing trust. We are insisting that a transitional period should exist for the Romanian banking system, as are other countries in the peripheral area of the European Union. The moment the Romanian banks will be borrowing at the same costs as the German or Dutch banks we will be realistic and we will understand that it is normal to have the same prudential requirements as those we see in the core of the European Union".

The NBR governor also said that during the transition period, the Central Bank will continue to be cautious and to ensure the stability of the financial system, so that it would prevent the use of public funds for supporting the system.

He emphasized that the entire local banking system will need to look towards the new regulation and supervisory mechanisms.

Also, next year, the banking groups which received government bailouts will fall under the surveillance of the European Central Bank, according to Bogdan Olteanu, who went on to say that some of those groups have subsidiaries i