CONSIDERATIONS ON THE ISSUANCE OF MUNICIPAL BONDS IN ROMANIA
The global financial crisis raised the price of the access to bank loans, a viable solution for financing is represented by issuing municipal bonds. This paper presents the current situation of municipal bons issues in Romania focusing on destination, on costs, on loans’ guarantees and their impact on indebtedness of local government. Local municipal bond market in Romania has a relatively short history, tailored after 2001, knowing that a considerable advance in recent years. The most common reasons for which public authorities are calling for loans are: either in need of cash or in need to balance the budget.
Issues in Development of Government Bond Markets
Developing a government securities market is a complex undertaking that depends on the financial and market system development of each country. For many governments, this involves immense challenges as the problems that inhibit securities market development run deep in the economy. For example, some governments rely on a few domestic banks for funding, which makes competition scarce and transaction costs high. In addition, a proliferation of government agencies issuing securities can fragment national government securities markets. Absence of a sound market infrastructure may make specific actions to develop a government securities market premature. A paucity of institutional investors, low domestic savings rates, and lack of interest from international investors can result in a small, highly homogeneous investor group, contrary to the heterogeneity needed for an efficient market. Furthermore, economic instability, often fed by high fiscal deficits, rapid growth of the money supply, and a deteriorating exchange rate, can weaken investor confidence and increase the risks associated with development of a market for government securities. This paper presents a brief overview of the key policy questions that arise for policymakers seeking to further develop their domestic government securities market.
Pension Reform and Capital Market Development "Feasibility" and "Impact" Preconditions
The link between pension reform, and capital market development, has become a perennial question, raised every time the potential benefits, and pre-conditions of pension reform are discussed. The author asks two questions. First, what are the basic"feasibility"pre-conditions for the successful launch of a pension reform program? And second, what are the necessary"impact"pre-conditions for the realization of the potential benefits of funded pension plans for capital market development? His main conclusion is that the feasibility pre-conditions, are not as demanding as is sometimes assumed. In contrast, the impact pre-conditions are more onerous. The most import feasibility pre-condition is a strong, and lasting commitment of the authorities to maintaining macroeconomic, and financial stability, fostering a small core of solvent, and efficient banks, and insurance companies, and creating an effective regulatory, and supervisory agency. Opening the domestic banking, and insurance markets to foreign participation, can easily fulfill the second requirement. The main impact pre-conditions include the attainment of critical mass; the adoption of conducive regulations, especially on pension fund investments; the pursuit of optimizing policies by the pension funds; and, a prevalence of pluralistic structures. The author argues that pension funds are neither necessary, nor sufficient for capital market development. Other forces, such as advances in technology, deregulation, privatization, foreign direct investment, and especially regional, and global economic integration, may be equally important. But pension funds are critical players in"symbiotic"finance, the simultaneous and mutually reinforcing presence of many important elements of modern financial systems. They can support the development of factoring, leasing, and venture capital companies, all of which specialize in financing new, and expanding small firms.