The collapse of a Romanian investment fund has caused a wave of panic about the health of the country's banks. RFE/RL correspondent Ron Synovitz examines how the lack of public trust in Romania's banks has elevated street rumors to the level of a national security threat.
Prague, 31 May 2000 (RFE/RL) -- A panic run on Romania's largest savings bank this week has revealed the vulnerability of Eastern Europe's shaky financial sectors -- and the dramatic extent to which street rumors can affect an economy in a country where reforms have not been fully implemented.
Thousands of angry Romanians, fearing they might lose their deposits at Banca Comerciala Romana, or BCR, have been queuing in front of the bank's branch offices across the country this week to withdraw their savings.
The panic follows the collapse last week of an investment fund in which thousands of Romanians lost their money. Many of those waiting outside of BCR offices this week told RFE/RL correspondents that they had received an anonymous phone call warning them that BCR was on the verge of collapse.
The rumors led Prime Minister Mugur Isarescu to go on national television yesterday to try to convince people that BCR was stable. But even Isarescu admits that now there is pressure on BCR because of all the withdrawal requests. And with so many people rushing to trade their Romanian lei for U.S. dollars, the panic has also hurt the value of the lei on foreign exchange markets -- despite steps by the National Bank to keep the official exchange rate stable.
Isarescu says the panic has been fueled by his opponents in an orchestrated bid to destabilize the economy and his government.
He says his opponents want the International Monetary Fund to vote against a nine-month extension of a vital $540 million loan program that originally was due to expire today. In addition to an immediate $110 million IMF disbursement, an extension of the program also would clear the way for fresh credits from other lenders -- money that Isarescu's government considers vital to the success of its economic reform program.
Speaking on television yesterday, Isarescu said:
"I beg you to review very carefully if this confusion could not be somehow connected to the fact that the IMF board is scheduled to approve the stand-by agreement with Romania, which in turn will unlock funds from the World Bank, European Union, and from other official and private sources of the financial international market, that could help the recovery of the Romanian economy."
The IMF is concerned about the confusion that has resulted from rumors about the health of Romania's banks. Yesterday, the IMF announced it would delay a final decision on its Romanian loan program by as long as another week. The decision could come as soon as Friday.
In the meantime, Isarescu called a meeting of Romania's Supreme Defense Council today to discuss whether the bank panic has national security implications. He has also launched an investigation into who may have orchestrated the hundreds of anonymous phone calls.
One lead in the investigation has come from former soccer star Sorin Cartu, who used to play on Romanian's national team. Cartu was one of many BCR clients in the southwestern town of Craiova who received an anonymous phone call last Sunday warning that the bank is on the verge of collapse.
But unlike most others, Cartu has a Western-made mobile phone that identifies the phone numbers of callers. He noted down the number that placed the call, and that number has been traced to the Craiova offices of a BCR rival -- the privately owned Banca Populara Romana.
Managers at Banca Populara Romana told RFE/RL that the phone line is in a part of the bank where any customer could use it.
Authorities have not ruled out the possibility that Banca Populara Romana may have been involved in attempts to destabilize BCR. But bank officials say they are offering film from their security cameras to aid the investigation. They say the film will support their claims that somebody from outside the bank had used the phone.
Bogdan Preda, a journalist working in Bucharest for Western financial news agencies, says panic would not have occurred if Romanians weren't already skeptical about the lack of banking reforms.
"They fear the fact that the banking system is extremely frail here. Things can happen overnight, and they could lose their money. They fear that there is not enough respect for their savings. This is why they are rushing to bank counters to take their money out."
BCR officials in Bucharest say the panic appears to be over for now, as few clients have asked to withdraw their money today. But RFE/RL correspondents report that people are still queuing up to make withdrawals from BCR branches in other cities.