Romanian banks were nationalized in 1948. Established in 1880, the bank of issue is the National Bank of the Socialist Republic of Romania, which also extends short-term loans to state enterprises and supervises their financial activities. The Romanian Bank for Development (1990) finances investments of state enterprises and institutions and grants long-term credit. As investments increased in volume, this bank was required to intensify its control over the use of funds allocated for investment. The Romanian Bank for Foreign Trade conducts operations with foreign countries. Savings are deposited with the Loans and Savings Bank. In 1974, New York's Manufacturers Hanover Trust opened an office in Bucharest, the first such instance for a Western commercial bank in a communist nation.
Romania has generally been very cautious in its approach to banking reform. Since 1990, the financial sector has undergone a fundamental overhaul, although the pace of change has been slower than elsewhere in the region. The number of banks rose from five in December 1990 to 41 by the end of 2000—including four branches of foreign banks, four branches of joint ventures based abroad, and 33 domestic banks. The foreign specialized banks—for development, agriculture, and foreign trade—still handle almost all of the business in these areas. The Romanian Commercial Bank is still the banker to most Romanian firms, while the Savings Bank retains a virtual monopoly on personal savings deposits. At decade's end, Romania's financial institutions, like the rest of its economy, remained in severe and protracted crisis. Despite repeated calls from the IMF to privatize, the seven state-owned banks still controlled 70% of all assets in Romania's banks. Moreover, these banks continued to be plagued by bad debt.
The International Monetary Fund reports that in 2001, currency and demand deposits—an aggregate commonly known as M1—were equal to $2.1 billion. In that same year, M2—an aggregate equal to M1 plus savings deposits, small time deposits, and money market mutual funds—was $9.3 billion. The discount rate, the interest rate at which the central bank lends to financial institutions in the short term, was 35%.
Romania set up its first postwar stock exchange in 1995, after the enabling legislation has been delayed for several years. The RASDAQ (Romanian Association of Securities Dealers Automatic Quotation), an over-the-counter securities market, opened in 1996. As of 2001, the total market capitalization of the RADAQ was $2.1 billion, up 98% from the previous year.