Romanian banks believe “greed tax” can still hinder financial intermediation

The Romanian Banks' Association (ARB) admitted that the revised form of the so-called “greed tax” passed by the Government last week is more bearable than the form initially inked in December, but they warned that it can still hinder lending, local Ziarul Financiar reported.

The new benchmark to be used for calculating the retail loan interest rates might transfer risks and volatility to debtors, they warned.

The two main amendments the Government passed last week modified the “greed tax” to be paid by banks (at a much lower value) and introduced a new benchmark to replace the ROBOR in calculating interest rates for retail (mortgage and consumer) loans. Under the new regulations, the benchmark is calculated as the weighted average of the interbank money market for maturities of 6 months and 3 months. The quotation-based ROBOR benchmark was subject to manipulation by banks, government representatives claimed.

As regards the “greed tax”, ARB said the new tax is "too complex, hardly predictable, which may have negative effects on growth in financial intermediation." Indeed, the value of the tax can be reduced by banks that extend loans above a certain benchmark of cut the loan/interest spread, which make the financial optimization rather complex.

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