“Nonsense”, “bomb”, “innovation” – Central bank governor describes ROBOR-based tax on bank assets

National Bank of Romania (BNR) governor Mugur Isarescu held a press conference on Monday to talk about the government’s Emergency Ordinance 114, which aims to tax banks’ assets at levels based on the evolution of the ROBOR rate. Isarescu had a clear negative reaction to the idea, calling it either nonsense, a “hard to comprehend bomb”, or ironically saying it was an “innovation” in finance.

Linking ROBOR to the asset tax is “abnormal” and should be discussed in the National Committee for Macroprudential Oversight, according to the governor, whose term will end in the summer of 2019.

Isarescu also pointed out that the recent decrease of the ROBOR rate has nothing to do with any pressures made by the government. He also said that the idea that the BNR would pressure banks to keep ROBOR at higher levels was “nonsense”.

The governor added that the government’s idea to link the asset tax to the ROBOR rate was something he had not seen before: “Bank asset tax is applied in some states, but it’s not linked to ROBOR rates. We can say it’s an innovation – you don’t come up with this sort of incomprehensible bomb at the end of the year, just before Christmas.”

Isarescu admitted that there were parts of the law that he hardly understands. However, he also said that a BNR team had conducted an impact study that showed billions of euros would be lost due to this tax.

“Normally, the impact study should have been requested before the law, but we were asked to do it afterwards. The impact reaches billions of euros, these are serious things. We have the right to make proposals, suggestions, even if we can’t amend an OUG. But we can point out its impact, and the Finance Ministry should respond,” said Isarescu.

He added that the bank needed more time to assess the effects of the tax: “Give us a little time to evaluate. This nonsense took us by surprise, too.”

It is unclear whether Isarescu will run for another term, but it’s very unlikely that the current government would make him an offer. Isarescu, who is now 70 years old, has been the BNR governor since 1990, and only briefly gave up this role while he was a prime minister in 1999.