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 (EO 50) the conditions under which loans can be granted. 🙂

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

By this Ordinance, the State has decided to protect the population from possible increases in loan interest rates resulting from unilateral decisions of the banks.

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

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

❗⠀It is good to know also that:

➤⠀îOn May 2, 2019, the Romanian State issued Emergency Ordinance 19 / 2019, through which the ROBOR index is replaced with a new index, namely IRCC. The new index applies to loans granted to individuals.

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

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