Romanian banks put investments on hold ahead of “perfect storm”

The Government’s emergency ordinance 114/2018, which introduces a new tax on banks’ financial assets, among others, is calling for a new crisis and creates “the perfect storm” for the local economy, Sergiu Oprescu, the head of Romanian bankers’ association (ARB), said on January 18 when ARB and the other association of Romanian bankers CRPB held a joint press conference. This is by far the highest of the similar taxes enforced in other countries in the region and it is simply not sustainable if evaluated ex-post for a period of ten years, Oprescu argued, according to local Profit.ro. The estimated impact of this tax is EUR 1 billion per year. This means, that, after the crisis, foreign banks should have brought in Romania another EUR 8 billion in addition to the EUR 4 billion they invested, if this tax had been in place, he explained. Whereas indeed Romania’s banking system boasted record profitability over the past couple of years, its profitability over the past decade (3.2% on average return on equity according to Oprescu) was half of that in the European Union on average. Representatives of Banca Transilvania and Banca Comerciala Romana BCR (part of Erste Bank group), the country’s two largest banks, announced that they have put on hold their investment plans. “We are not in position to encourage credit”, BT CEO Omer Tetik said, adding that the bank has also suspended plans for the renovation of 200 regional branches, according to Economica.net. All the investment projects of BCR are on hold, bank’s CEO Sergiu Manea said as well. Even state-owned CEC Bank is considering investment cuts in order to find resources to pay the new tax, according to its president Radu Ghetea, quoted by Ziarul Financiar. Tax on financial assets has deep impact, top Romanian lender says editor@romania-insider.com (photo source: Pixabay.com)