Central bank economist: Mandatory private pension funds consider pulling out of Romania

Most if not all seven mandatory private pension fund managers are considering pulling out of Romania because of the measures imposed through last year’s emergency ordinance OUG 114, Valentin Lazea, the chief economist of the National Bank of Romania (BNR), said.

Under OUG 114, which also introduced a new tax on bank’s assets and turnover taxes for the energy and telecom sectors, fund managers are required to increase their capital by up to 10% of the assets under management (the 10% ratio applies to six out of the seven fund managers), meaning that they should come up with some EUR 800 million worth of fresh capital by the end of the year. The sum is two times bigger than the sum of all gross commissions cashed in over the last 11 years, Lazea explained. Furthermore, the fees they are allowed to charge were diminished and pegged to the yields generated by the managed funds.

“Under these circumstances, from what I understand from the discussions with the Association of Private Pension Fund Managers, the majority, if not all seven companies are thinking about withdrawing from Romania,” Lazea said, quoted by Mediafax.

The effort that the fund administrators made would be too big “for an non-existent gain,” he explained, adding that 7.25 million people would suffer as a result.

Lazea said that the Bucharest Stock Exchange might also be impacted as “instead of moving towards the emerging market [status], it would take a step back.” The state budget would also be impacted if an important financier disappeared. He called for a dialogue between the authorities and the mandatory private funds administrators to “reach a compromise and prevent this form of financing from disappearing.”

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