UPDATE - A EUR 0.5 bln misunderstanding: Romania’s new FinMin retracts statement about dropping private pension funds

Romania’s new Finance Minister Ionuţ Mişa said on Thursday that the mandatory private pension funds would be abolished. Then, a few hours later, he retracted his statement saying that it was a confusion. Meanwhile, the main index of the Bucharest Stock Exchange – BET dropped almost 4% and some EUR 500 million evaporated from the capitalization of the local listed companies. The EUR/RON exchange rate was also impacted. Shares of state-owned energy companies Transgaz and Electrica dropped over 5%. At present, the mandatory private pension funds manage assets of EUR 7.7 billion, EUR 1.6 billion of which are invested in listed companies. Pension funds have had an important role in the local capital market’s recovery in recent years due to their constant investment flows. The EUR jumped to over RON 4.57 on the interbank market, on Thursday afternoon, up from the RON 4.5503 official rate announced by Romania’s National Bank (BNR) at noon. Ionuţ Mişa, who was heard on Thursday by the Parliamentary committees before getting their validation for the finance minister position, said the Government would drop the Second Pension Pillar, representing the mandatory private pension funds, and the money would be returned to contributors. “The Second Pillar will be dropped. The money will be returned to all those who contributed, and they will have the option of choosing between the social insurance budget or the Third Pillar. They will choose if their money are administered by the state or privately. We did not establish a schedule, we are planning it for the end of the year. […] The pension funds in the Second Pillar administer assets of some RON 40 billion. But the pension that a contributor would benefit from would be of some RON 25 (EUR 5.6) per month,” minister Mişa said, quoted by News.ro. His statement came as a shock for the local capital market as the Social Democratic Party’s leaders have firmly denied any intention to nationalize private pension funds. In April of this year, the Financial Supervisory Authority (ASF) sanctioned NN Pensii, the biggest private pension fund manager in Romania, with a RON 750,000 (EUR 166,000) fine, for spreading false rumors about the Government’s alleged intention to nationalize the private pension funds. Liviu Dragnea, the head of the Social Democratic Party (PSD), accused the local subsidiary of Dutch insurance group NN of spreading false rumors about the possible nationalization of the local private pension funds and inciting its clients to protests