Romania’s Bank Tax Could Lower Interests on Deposits

The tax, introduced by the government in a surprise move in late December 2018, will determine banks to cut costs. Banks would have to pay a progressive tax of 0.1-0.5% of assets if money market rates exceed 2%.

The most plausible cost-cutting measure would be to lower interest rates on deposits, which are already low, at an average of just 1.76%, according to central bank statistics for November 2018.

“What I can say as a former banker is that the main impact [of the tax] will not be on loans but on deposits, where rates were already below inflation,” said Mihai Bogza, executive director of the Concordia employers’ association.

Romania’s inflation rate dropped to 3.4% in November from 4.3% in October.

Banks could keep interest rates on consumer loans unchanged or could raise them, to gain margin, as deposit rates are low. The average interest on household loans stood at 7.39% in November 2018, according to central bank data.

Also, the central bank on Tuesday kept the benchmark interest rate unchanged at 2.5% a year.