Why are interest rates correlated with ROBOR?

It's simple: it was the decision of the Romanian State, which in 2010 legislated through Emergency Ordinance 50 (OUG 50) the conditions under which loans can be granted. 🙂

Thus, the State (following a European Directive) has decided that loans can be granted either with fixed interest or with an interest rate linked to a reference index - ROBOR. This reference index was chosen because it is an internationally used practice and, moreover, its determination is transparent.

With this Ordinance, the State has decided to protect the population from possible increases in interest rates on loans that are the result of unilateral decisions by banks.

Therefore, now (under the obligation in the law) credit contracts in lei with variable interest rate mention an interest rate composed of ROBOR + a fixed bank margin.

In this way, for a bank, ROBOR is the cost of the raw material, and the margin is the profit from which costs (rent, supplies, ATMs, software, salaries, etc.) and possibly profit are covered. Thus, ROBOR does not influence a bank's profit. 😅

❗⠀It'salso good to know:

➤⠀On2 May 2019, the Romanian State issued Emergency Ordinance 19 / 2019, which replaces the ROBOR index with a new index, namely IRCC. The new index applies to loans offered to individuals.

➤⠀IRCCapplies only to variable-rate loans granted in lei, is calculated as a weighted average of interest rates with the volumes of transactions on the interbank market and is updated quarterly, similar to the method used for ROBOR6M.

It is published every working day on the website of the National Bank of Romania. 😉