Populism evokes sympathy. Populists look really smart, but in reality populism is a huge evil. We are now meeting at the European Banking Federation, and the banks will be analyzing there for more than half the time, which will take place during the European Parliament elections next year. From the point of view of populism, this is an urgent problem in the economic sphere, Florin Danescu, executive president of the Association of Romanian Banks (ARB), said on Tuesday at a conference on economic topics organized by the National Institute of Statistics.

Today, populism is viewed from three points of view: whether it is – God forbid – an ideology, whether it is rhetoric, or whether it is simply “food for fools” (food for the weakest of angels – n.red), the executive branch of ARB also explained

Analysis of populism indicators puts Romania in second place in Europe. On a scale of 1 to 10, Romania scores a 7.5, Danescu also said. According to him, Italy has 7.4, and Hungary – about 8. These are numbers that analyze economic data. I can’t afford to play politics here. I am an economist, I do not even say as a banker, also clarified Florin Danescu

Relations of Americans, Europeans and Romanians with banks

In the United States, when it comes to bank financing, companies use loans for 25%, and 75% are represented by capital market financing. In Europe, everything is the opposite.

But this 25% of total financing from bank credit represents 215% of America’s GDP, Danescu states, adding that in Europe 75% means 90% of European GDP.

How is Romania? 25.5% of our GDP is financed by loans. Although we talked for 8 years about the fact that we should develop the bank lending market and, in fact, the financing of the Romanian economy, we saw that we were punished in two stages.

First time with a wealth tax, precisely for the reason that we don’t want that we are underfunding the economy. And the second time with this 2% turnover tax, which is added to the classic income tax.

We now have a profit, which is still being discussed, of around 2 billion euros and which the political market considers too high. What’s too big in a free market? Let’s see.

Capital investment in the banking system amounts to 13 billion euros – about a fifth of the total capital invested in Romania. I have asked many entrepreneurs if they would invest in the banking industry with capital of 13 billion to make a profit of 2 billion. And they all told me no.

And this led me to compare the profitability of all 24 industrial sectors in Romania in terms of ANAF, and I found that among all industries, the banking industry ranks first in terms of assets. Maybe it’s good or maybe it’s bad…? We begin to question whether, for example, construction should have had higher assets, or whether agriculture should not have had higher assets. But we will not dwell on these details now. In the “capitals” we are in fifth place. And in terms of profit, we are in seventh place. A bank shareholder can say that he is not satisfied at all. He brought capital fifth, assets first (as effort) and has a record that puts him only seventh.

The return on capital (ROE) of the banking sector is in 24th place. What are the most “profitable” enterprises in Romania

The authorities seem to have followed the European wave of bank taxation, although in Romania the return on capital (ROE) of the banking sector is 24th with an ROE of 16.4%, with many other industries faring much better since then. view view

What’s more, broken down by CAEN code, the most “profitable” business in 2022 was Other Personal Services (if the term “nursing homes” tells you anything…), which, with assets of 13 billion, generated a profit of 2.6 billion in 2022.

In addition, the IT&C sector had a return on equity of over 41%. Construction had a profitability of about 30%, trade – about (28.6% wholesalers and 27.8% retailers). According to government documents seen by HotNews, energy producers’ return on capital last year was 23.5%, which is in line with the national average.

In addition, although the tax on banks has already been adopted, IFIs have not been taken into account, many of them are controlled by politicians directly or through intermediaries

The ECB is not very happy with the taxation of the institutions it oversees. But do not abuse political ambitions

At the European level, the ECB is not the happiest about taxing the institutions it manages.

“The materialization of negative risks can significantly reduce the solvency of borrowers and can lead to a decrease in the profitability of banks. Such a measure must be taken with caution, the European Central Bank points out, to ensure that the additional levy does not affect the ability of banks to create a strong capital base and avoid a deterioration in credit quality,” says the ECB’s opinion sent on the occasion of the introduction of a bank tax in Italy.

“The reduced ability of banks to provide reserves against the background of a possible decrease in the quality of loans may jeopardize the transmission of monetary policy measures by banks to the economy. The introduction of an additional levy may make it more difficult for banks to accumulate additional capital reserves as their earnings will decrease, making them less resilient to economic shocks. In fact, such extraordinary commissions can have negative economic consequences, limiting the bank’s ability to provide loans and leading to less favorable conditions for customers,” the document also states.

Higher costs and a reduction in credit supply may negatively affect real economic growth, the ECB also notes.

Italy is the latest case in a European country to tax banks on excess profits made from high interest rates to help mortgage holders, Reuters reported.

Surcharge in the Czech Republic

In November, the lower house of the Czech parliament approved an exceptional tax of 60% on energy companies and banks, with the aim of raising $3.4 billion this year in what are considered excessive profits to finance aid to individuals and companies hit by electricity and price hikes on gas

Surcharge in France

President Emmanuel Macron said in March that companies with more than 5,000 employees should share more of their “exceptionally large” profits with employees instead of buying back shares.

But he and Finance Minister Bruno Le Maire have ruled out an exceptional tax. This is because French banks are subject to an anti-usury law that limits the pace of quarterly growth in loan prices.

France also has a popular regulated savings system, which accounts for just under 20% of bank deposits, with inflation-linked returns that adjust faster than lending rates.

Surcharge in Germany

For some of Germany’s biggest banks, net interest income is up 50-70% from pandemic lows, but a capital gains tax was off the table for pro-business Finance Minister Christian Lindner.

Germany’s finance ministry declined to comment on Italy’s move in August, but said a tax hike was ruled out under the German coalition government’s deal.

Surcharge in Hungary

The Hungarian government amended a one-off tax imposed on key sectors of the economy in a decree published in June, saying banks could reduce their one-off tax payments by up to 50% from 2024 if they increase their purchases of Hungarian government bonds.

It also introduced a new “social tax” of 13% on certain types of investments, including investment bills and interest income from bank deposits.

Surcharge in Italy

On August 8, Italy approved a flat tax of 40% on profits that banks get from raising interest rates, and plans to use the proceeds to help mortgage holders.

It expects to receive less than 3 billion euros ($3.3 billion) from the tax, according to sources.

Later, the Italian Ministry of Economy clarified that the commission cannot exceed 0.1% of the total assets of creditors. A media report on August 18 said the European Central Bank (ECB) was preparing to send a letter to Italy objecting to the tax and criticizing Rome for not informing the Bank of Italy or the ECB in advance, as it is believed to have done. act according to the rules of the European Union.

Surcharge in Lithuania

In May, Lithuania’s parliament approved an exceptional tax on the banking industry’s net interest income for 2023 and 2024, following a sharp interest rate hike by the European Central Bank.

The 60 percent tax on net interest income, 50 percent higher than the four-year average, is expected to raise 410 million euros ($451 million) for the state budget and be used to support the military.

Surcharge in Spain

Spain plans to raise 3 billion euros by 2024 from an exceptional tax on banks approved last year, which imposes a 4.8 percent tax on their net interest income and net commissions above a threshold of 800 million euros.

Surcharge in Sweden

Sweden’s government last January introduced a “risk fee” on institutions with more than SEK 150 billion ($14.1 billion) in debt related to Swedish operations to shore up public finances and create room for hedging costs, which can be caused by a financial crisis.

The tax was equal to 0.05% of liabilities in 2022 and increased to 0.06% in 2023.

The government expects to attract SEK 6 billion per year.

Surcharge in the UK

The UK has not introduced a one-off bank levy, but has levied a bank levy since 2011, introduced in response to the financial crisis, which applies to UK banks’ global balance sheet assets as well as assets belonging to foreign banks’ operations in the UK. .