mugur isarescu : closing remarks - eurofi high level seminar closing remarks by mr mugur isarescu, governor of the national bank of romania, at the eurofi high level seminar 2018, bucharest, 27 april 2018. * * * i am honored to be invited to give a few closing remarks at this eurofi conference. eurofi has turned, over the years, into a major european event that deals with financial issues. the great recession compelled governments and central banks, regulators and supervisors of finance, to put into motion a radical reform of the ways financial industry does function. i do not wish to bother you with remarks that repeat what seems to have become a new conventional wisdom. however, it is never redundant to remember that oversize, too high leverage, unconstrained and reckless risk - taking, dangerous financial products, insufficient transparency, and, not least, poorly understood systemic risks, have forced the content and the pace of reforms. the european institutions created a new regulatory framework after the eruption of the crisis. the european systemic risk council ( esrb ) represents the attention we all give to interconnectedness, to systemic risks that show up in financial markets. not long ago, our widely embraced practices and thinking in central banking, in the regulation and supervision of finance, seemed like indestructible building blocks. the expansion of shadow banking, fintech, nonconventional threats under the appearance of cyber - attacks, tail events in general, keep us vigilant and ask from us open - mindedness and constant reexamination of our beliefs. there is much in the evolution of financial markets which provides puzzles ; i am referring to the persistence of very low inflation in spite of large scale qes, the flattening of the philips curve, the emergence of parallel currencies, etc. there is also a revival of attempts to control capital flows under the embodiment of macro - prudential means and a growing concern of central banks with financial stability. as a matter of fact, quite often, financial stability seems to have become the dominant goal of central banks in our turbulent times. developments in the eu, which are pertinently reflected by the sessions of this eurofi conference, indicate that, in spite of major progress achieved in redoing the regulation and supervision of finance, still much needs to be done. some of the problems we do encounter are linked with the legacy of the crisis and the years that preceded it. it would

##ry role in the foreign exchange deposit market as of october 15, 2010. in addition, the maturity of the foreign exchange deposits borrowed within the pre - determined borrowing limits by banks from the cbrt was reduced to one week, as was the case before october 2008. distinguished guests, 43. the quantitative easing adopted in the last quarter of 2010 by some major central banks and the consequent boost in capital flows to emerging markets have necessitated significant changes to our monetary policy strategy. short - term capital inflows feeding the divergence between domestic and external demand caused current account deficit to widen rapidly, thus necessitating macroprudential measures. hence, we jointly use liquidity management facilities and reserve requirements as well as policy rates in order to achieve price stability and financial stability. bis central bankers ’ speeches 44. in line with the new policy design, the tl required reserve ratio was raised by 0. 50 points each in september and november to 6 percent. additionally, in order to more effectively use the required reserve ratio as a tool to contain macroeconomic and financial risks, interest payments on tl reserve requirements was terminated in september. 45. due to the accelerated capital inflows, our bank reduced its overnight borrowing rate from 5. 75 percent to 1. 50 percent in november, and increased the lending rate by 0. 25 points to 9 percent. late liquidity window rates were accordingly revised. besides these measures, with an extensive arrangement made in december, the tl required reserve ratios were differentiated by maturity and the reserve requirement base was expanded to include certain foreign and domestic repo transactions which were formerly not subject to reserve requirement. this arrangement aims to reduce maturity mismatch in banks ’ balance sheets by extending the maturity of banking sector liabilities and also aims to encourage long - term capital flows. 46. the ongoing strong course of credits as well as other domestic demand indicators in march implied that additional monetary tightening would be necessary. the cbrt assessed that implementing monetary tightening through reserve requirements, rather than using policy rates, would be more effective in containing macro financial risks resulting from the divergence of domestic and external demand. in this respect, the cbrt decided to deliver a notable hike in the weighted average of required reserve rates on short term liabilities. accordingly, tl required reserve ratios for sight deposits and short - term deposits / participation accounts and other liabilities were raised. our measures regarding the required reserves are displayed on the slide. with the last arrangement to be effective as of