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The European Central Bank (ECB) points out that the introduction of special taxes on banks or financial institutions must be preceded by a comprehensive impact assessment studies to ensure that the benefits of the tax measure outweigh the costs.
"Romania needs to systematically and effectively resort to assessing the regulatory impact and to consulting and involving the stakeholders in the development and implementation of reforms. A comprehensive assessment study of the impact of the tax on the financial assets of banks is needed to ensure that the benefits of the tax measure outweigh the costs, taking into account not just the potential negative effects on financial stability and the economy, but also the potential implications for bank lending conditions and the transmission of the monetary policy," reads the ECB's opinion on the tax on the financial assets of banks, published on the website of the international financial institution.
According to the ECB, a comprehensive analysis of the impact on the Romanian economy is required, given that the introduction of ad hoc taxes on banks can create uncertainty in their activities and ultimately can pose risks to credit provision, which could affect the long-term growth of the real economy. The ECB warns against credit incentives that might lead to distortions in terms of the efficient allocation of the credit offer and to further sectoral imbalances in the real economy.
Referring to the fact that the Ordinance precedes tax reductions for banks offering loans to the real sector in an increased volume or at reduced margins, the ECB points out that any measure aimed at stimulating lending, if not properly designed, may causes distortions in credit allocation. "These measures may cause banks to become too permissive in terms of their lending standards so as to achieve targets regarding credit volume," the ECB points out.
The ECB also argues that the tax introduced by the Government Ordinance will have an overall negative effect on the profitability of the banks. "As the retained earnings represent an important source of capital, a tax on the activity of banks may have implications that should not be neglected on their ability to mediate. Thus, the impact assessment should also take into account the overall equilibrium effects of the tax measure, especially in a country based on the presence of foreign intermediaries, that can easily avoid the increased tax burden by geographically reallocating assets," the ECB says.
As concerns the interest rate reference index for consumer credit agreements, the ECB points out that the government ordinance should take into account the fact that the entry data based on real transactions should only be used when they are sufficient and appropriate. "If transaction-based data are insufficient or inappropriate to accurately and reliably represent the market or the economic reality that the index is intended to measure, input data that is not transaction data may be used, including price estimates, quotations and firm quotes or other values," the ECB notes.
The ECB also appreciates that the Government Ordinance does not specify essential elements of the new index, such as the administrator of the new index, or the complete methodology for establishing the new index, or when these details will be made available. "In the event that BNR [the National Bank of Romania, ed.n.] would be designated as administrator, the government ordinance should not affect the BNR's margin of appreciation with regard to the development of the methodology for establishing the new index so as to ensure accuracy, integrity and reliability. In case central banks provide reference indices, it is their responsibility to establish appropriate internal procedures to ensure the accuracy, integrity, reliability and independence of these indices, taking into account best international practice, where relevant and appropriate," the mentioned document states.
Finally, the ECB underlines it should be consulted on draft national legislation that provides additional tasks for the BNR in this regard.
At the beginning of May, the National Bank of Romania (BNR) published the new consumer credit reference index (IRCC), of 2.36 percent per annum, regulated by OUG 19/2019, calculated as the arithmetic mean of the daily interest rate on interbank transactions in the fourth quarter of 2018.
