mugur isarescu : opening speech - annual ebrd eu - 11 meeting opening speech by mr mugur isarescu, governor of the national bank of romania, at the annual ebrd eu - 11 meeting, bucharest, 13 april 2018. * * * vice president heilbronn, minister teodorovici, your excellences, ladies and gentlemen, you are most welcome here, at the national bank of romania. together with the board of the bank we are privileged to greet you here, today, for the annual european bank for reconstruction and development eu - 11 meeting. let me begin by saying that the national bank of romania has always had a consistent and reliable cooperation with the european bank for reconstruction and development. several high ranking officials from the ebrd have visited the national bank of romania, jacques de larosiere being one of them, in order to discuss topics of mutual interest and, of course, the ebrd activity in romania ( especially ebrd ’ s contribution to the reform of the banking sector in romania ). i would like to recall that the national bank of romania has hosted, over the years, more than a few official presentations of the ebrd transition report, including the 2014 edition, ” innovation in transition ”. on a more personal note, i confess i am among those who signed the agreement establishing the bank in 1991, as the representative of romania to that historical moment. i will take this opportunity to acknowledge the role that the european bank for reconstruction and development had in mitigating the global financial crisis. ebrd ’ s involvement in two very important initiatives, namely the local currency and local capital market initiative and the vienna initiative, has been essential for romania and the region. i am closely following the evolution of the ebrd. i believe that it finds itself at a cross - road, as the world has been changing rapidly due to the remarkable achievements of the past century : the it revolution, artificial intelligence, the technological progress and so on. ebrd, as other financial institutions, ought to adapt itself to this new environment and try to respond wisely and appropriately. in this respect, i think that ebrd has to continue its work in the countries for which the bank was initially created, as transition gaps still exist. we all need to share our experience with the new countries of operations, adjusting our knowledge to new challenging environments. we need to remain open minded and ready to tackle further challenges in

domestic private banks are prevalent. second, this dominance is a relatively new phenomenon : the share of foreign - owned banks became prevalent as late as the first years of this century, even in central and eastern europe. in other words, it has been possible to verify the paradigm in practice only in the last few years. it is fair to say that foreign - owned banking prevalence in central and eastern european countries has happened more by default than by design. after a few banking crises which hit the region in the late nineties, the lack of domestic private capital, combined with the fragile situation of the state budgets, made it compulsory to privatize the existing banks by selling them to foreign entities. i must confess that i also advocated the penetration of foreign capital into the romanian banking sector. when my tenure as prime minister ended in late 2000, one piece of advice i gave to my successor was that the privatization of banks should continue as a means to promote restructuring of the loss - incurring soes and to stimulate convergence to the eu. i still believe that it was the right call, as foreign - owned banks had a favorable impact on economic growth and therefore played their part in the catching - up process, even if – ten years later – nouriel roubini sees the large share of foreign - owned banks in the romanian banking system as a liability. the counterfactual argument “ what would have been the performance of domestically - owned private banks? ” does not withstand scrutiny : domestic private capital simply did not exist. however this intellectual exercise is worth doing, given some shortcomings of foreign - owned banks, which were revealed afterwards. one such shortcoming was the excessive euroization of some economies in the region ( romania, hungary, baltic states ), given the reliance of foreign - owned banks on their parent banks for cheap financing. excessive euroization has proved to be a liability for all parties concerned : for the public, which became hostage to exchange rate risk without being properly hedged, for the central banks, which saw their transmission mechanism eroded, and even for the commercial banks themselves, which quite often had a large mismatch between loans and deposits in foreign currency. moreover, some of the banks have extended credit in “ exotic ” currencies ( swiss franc, japanese yen ), the strict regulations in their home countries ( austria, belgium ) notwithstanding, thereby increasing the vulnerability to adverse shocks ( banai, kiraly and varhegyi, 2009 ). would