The Convergence Of Romania With The Eurozone In Terms Of Financial Institutions

This study examines the integration of Romanian monetary system into European one and the transmission of liquidity shocks from eurozone to Romanian monetary market. Since Romania become a member of European Union, most of the Romanian banks are mainly provided by financial institutions placed in Europe. With the accession of Romania to the European Union, has started a process of integration of the national banking system into the eurozone banking system and thus, domestic financial institutions has began to be increasingly more subject to liquidity conditions and external contagion liquidity risk in the eurozone. In some periods, between EU accession and until the beginning of 2014, Romania has managed to reduce the volatility of the daily rates of monetary policy, compared with the eurozone, where, in the same periods, were recorded high volatility of monetary policy interest rates. Partial decoupling of the two money markets can be explained by economic stabilization policies adopted by Romania by improving the liquidity of the financial institutions and national measures taken by monetary policy makers in Romania. The main conclusion of this study is that the domestic banking sector is only partially integrated in the European banking sector in terms of money market liquidity and liquidity risk, and creating a stable framework for liquidity in Romania requires a mix of fiscal and monetary policies conducive to the development of financial instruments in long-term. However, the analysis shows that the sensitivity of liquidity in the Romanian banks to adverse developments on the European money market has increased and the ability of the internal factors to predict the liquidity conditions in national banking institutions is still high. Considering these aspects, we can say that, when we analyze liquidity risk in the Romanian banking system, we must take into consideration the influence of the external factors.