Ömer Tetik, CEO of Banca Transilvania: Any further increase in bank taxation will reduce the lending capacity of the real economy, firms and individuals

Ömer Tetik, the CEO of Banca Transilvania, made some statements to Ziarul Financiar on the information circulating on the market, according to which the ruling coalition is discussing an additional tax on banks' profits, on top of the tax on bank assets introduced last year.

ZF: Do you have any information about possible talks about overcharging banks?

Ömer Tetik: The banking system is already overtaxed in Romania. We have no information about active discussions in the political arena about a possible over-taxation of banks - such rumors are common with every change in legislation and most of the time they turn out to be untrue.

ZF: But what potential impact would any increase in bank taxation have on the economy?

Ömer Tetik: Any increase in bank taxation would immediately reduce the lending capacity of the real economy, firms and individuals. Banks use a significant part of their profits to increase their capital, not distribute it to shareholders. And every one leu of capital means five leu going towards lending to businesses and the population.

In our case, at BT - for last year's profit, almost RON 2 billion goes to capital, and that will allow us to roughly increase by RON 10 billion the amount going to lending. That means we capitalized 55% of the profit, precisely to increase lending.

This is a clear multiplier effect that contributes to increased prosperity, because credit generates jobs, investment and stimulates consumption.

Romania needs public and private funding to grow the economy, investments, jobs and wages, not to reduce these parameters through discriminatory over-taxation.

In addition, our country needs to reduce tax inequality and tax differentials, i.e. to standardize tax rates, not to differentiate them even further, because this interferes with free market mechanisms and makes collection more difficult. It would not be acceptable to have different tax rates in certain areas, because this means that some sectors are undermined, with an impact on competitiveness. In concrete terms, different tax rates would lead to less interest from investors to support the banking sector (getting better returns in other sectors or countries) and lead to a weaker banking sector which will not have the strength to support investment and the economy.

ZF: Companies criticize you for not lending. Why?

Ömer Tetik: Banks want to finance the economy and businesses at the lowest possible cost and thus increase the level of financial intermediation in Romania and total banking assets. It is primarily in our interest and this is already happening, within the limits imposed by the regulations and in correlation with the capital that companies have, so that we have a safe and healthy banking system for all customers. Financing costs - in Romania - are primarily influenced by the high level of interest rates that the State itself pays on government securities, a level determined by high demand (determined by the high expenses that need to be financed). It is also in our interest that these financing costs should be as low as possible so that the population, businesses and the State can finance themselves as cheaply as possible.

ZF: What will be the influence of the tax package on the economy and in particular on banks?

Ömer Tetik: Romania needs to focus on reducing waste, not on increasing taxation, because our estimate is that any increase in taxation will be seen in lower economic growth and means recession - an increase in the tax burden by 1 pp will generate a 0.5 pp fall in GDP. Basically, an additional leu taxed on banks can generate an economic fall of one leu. So taxing banks would have a double and devastating impact on the economy.

ZF: Banca Transilvania is the most traded stock on the stock exchange. What impact will the additional tax increase have?

Ömer Tetik: Equally importantly, additional taxation of banks would significantly impact the capital market - let's not forget that one of the significant shareholders of the banking system - and certainly in the case of Banca Transilvania - is the pension system. Any increase in taxation will affect 8 million people who are indirect shareholders in BT and other listed banks. We trust that decisions have and will be based on responsible analysis of the impact.