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Governor of the National Bank of Romania (BNR) Mugur Isarescu said on Tuesday that BNR insists that, in the case of Government Emergency Ordinance 114, the ROBOR Romanian Inter-bank Offer Rate be cut loose from asset taxation because keeping it there would be tantamount to attacking the independence of the central bank.
"Cutting ROBOR loose from this ordinance is a two-edge sword, so to say. The untying of ROBOR from asset taxation is something else, and for that we insist, because it is an attack at the independence of the central bank. The European Central Bank has already notified us and that that does not comply with or it violates the Treaty of the European Union, and there is nothing we can do about that. We have explicitly asked the finance minister to come up with a solution. The government is entitled to tax even banks, nobody challenges that. But everywhere in Europe the monetary policy rate was not been tied to taxation, and in the end ROBOR is part of the monetary policy," Isarescu said.
He said that if ROBOR is to be decoupled from lending, banks may charge other types of costs.
He explained that by applying Ordinance 114 interest on deposits would decrease, and the taxation of bank assets is done indiscriminately.
"Banking assets representing the mandatory reserves that banks keep with the National Bank are also being charged; they are called mandatory because a minimum of liquidity has to be secured, because banks make payments in the economy. So that is a duty, not an advantage. Tax is being levied indiscriminately on government securities that banks buy, that is their loans to the Romanian government (...) Among the proposals of the National Bank for improvement is not only cutting ROBOR loose, but also removing at least these three assets from the balance sheet of banks in the taxation process. As it stands, Ordinance 114 is discouraging lending and it will further discourage bank deposits and consequently investment," said Isarescu.
