such hard times worldwide, it is necessary, now more than ever, that the romanian authorities should exert caution and wisdom as concerns both public spending and specific promises. the run - up to elections is usually a period when hard to keep promises are easily made. at present, however, despite the most difficult international economic conditions in the post - war period, the pre - election public promises seem far more unrealistic. i would like to reiterate the fact that the nbr policies focus on the euro adoption in 2014. in the medium run, we envisage not only the resumption of disinflation and bringing price hikes in line with the european standards, but also the alleviation of imbalances, especially the gradual narrowing of external deficit, in order to render disinflation sustainable. in terms of monetary policy, it is crucial to foster savings with a view to narrowing the current gap in relation to investment. the increased contribution of the domestic component, amid the rise in saving ratio, can ensure the same high investment rate. in fact, the increase in interest rates, which is part of the current monetary policy stance, was aimed at fostering savings. the results are visible, even though – for statistical reasons – the nbr calculations appear to give a different picture. in order to avoid possible confusions, allow me to present several technical details. the data released indicate a faster dynamics of demand deposits compared to time deposits, apparently hinting at the emergence of additional inflationary pressures. we are dealing in fact with two developments related to statistical evidence rather than real economic substance. one such development is the transfer, since 2007, of forex - denominated demand deposits from “ quasi - money ”, which is part of m2, into m1 ( narrow money ). this is merely a matter of compliance with eu definitions. the economic substance has not changed : the romanians do not resort to foreign currency accounts for current transactions, but rather as a means of saving. another development weighs heavier and it is also manifest in the case of forex - denominated current accounts, while being extremely significant from a quantitative perspective for ron - denominated ones. since deposit accounts are subject to income tax, while current accounts are not, banks have developed a way to attract customers : current accounts whose yields are higher than deposit rates. this led to massive portfolio shifts to the detriment of traditional deposits, as households placed their savings in the so -

called current accounts, or even card accounts, which are highly remunerated conditional upon maintaining a balance higher than a certain floor. central bank experts have adjusted the figures based on the assumption that actual demand accounts should see a growth similar to that of currency in circulation, as it was the case in previous years. hence, it would appear that quasi - money rose over 80 % december 2004 through august 2008 versus only 40 % as indicated by statistical data. in other words, both household and corporate savings in domestic currency expanded at a pace much faster than that of time deposits. these statistics led the media to comment on a would - be stalemate in ron - denominated savings. the nbr specialists will make sure these developments are explained in further detail. this is how a fiscal policy slippage entails both a contraction in budget revenues and potential errors in assessing monetary developments. given the heightened turbulences on the international financial markets in the last few weeks and the fact that the nbr is vigilantly monitoring these developments, i believe we should refer to their potential impact on the domestic financial system and on the romanian economy as a whole. the romanian banking sector is still affected mainly by increased external financing costs. the limited impact is due to domestic financial environment characteristics, as well as to the prudential monetary policy and financial stability strengthening measures adopted by the central bank over the years. let me highlight the most important of these measures. first and foremost, credit institutions in romania do not have exposures to subprime instruments, which lie at the root of the turmoil. this is particularly due to the profitability given by wide interest rate margins on the domestic market as well as to the fast - paced increase in lending via traditional banking products. secondly, the overwhelming majority of banks operating in romania, including those with foreign capital, are legal entities subject to nbr licensing, regulation and prudential supervision. similarly to foreign bank branches having their main office in other eu member states, these banks abide by the basel ii prudential and capital adequacy standards. thirdly, some regulations issued by the national bank of romania have often proved more restrictive than the basel ii standards. more specifically, initial capital requirements for licensing a credit institution in romania are almost twice as much as the minimum level laid down in eu regulations. moreover, it is worth mentioning that the nbr representatives are part of the competent eu structures involved in the review and improvement of eu regulations governing the financial system architecture.