"We are not running charities." "How do think Copos would react if a government authority had asked him to reduce profits at one of his hotels by cutting room rates?"
These were some of the replies from banks to the "pleas" to the banking community by government minister George Copos for a reduction in rates on ROL credits.
"Please cut rates. Please support industry. Please support exporters," said Copos in discussions at the FINFAIR Money Fair 2005 yesterday. He said that banks should accept somewhat narrower profit margins and finance industrial investment or else they will have no one left to give loans to.
The delayed cutting of interest rates on ROL credits to match the cuts for rates on ROL deposits allowed profitability across the banking system to surge earlier this year: from 17% in December 2004 to 24.1%. This is the highest profitability rate in the banking industry that has been seen in the last five years. This is confirmed by the first-quarter results of a number of banks: BRD-SocGen''s profits have doubled, while HVB Bank''s profits went up 2.5 times.
The strong replies from bankers to the minister''s request were not long in coming. HVB Bank chairman Dan Pascariu explained that banks were institutions interested in profit making that follow the same rules as do the companies in which the vice-premier holds a stake. "How would Mr. Copos react as a businessman if we asked him to reduce his profits from his hotel and factory by lowering the prices for rooms and engines?" asked Pascariu rhetorically. On a similar note, Bancpost chairman Mihai Bogza said that commercial banks were economic operators and not "charities".
"Vice-Premier Copos is taking the consumer''s point of view. It''s a good thing other ministers from Agriculture or the Environment are not here as well, or else we would be hearing that not just exporters, but also those in the farming industry and the environmental sector need help, too."
"Let''s no feel sorry for the industry. There are very large funds in foreign currency available at 5-6%. No matter how much we might want to, we still cannot see a substantial demand for loans in ROL and I don''t think it will happen as long as the rate gap with foreign currency is maintained," said Pascariu, adding that banks were not able to grant substantial loans in ROL for 10 to 20-year periods since they have no long-term refinancing options in national currency as the average maturity for the deposits attracted is no longer than 6 months.
NBR Governor Mugur Isarescu added that comparing banks with charities was a mistake, which will not bring the banking system any closer to the real economy. However, he believes banks will be forced to cut rates under the pressure of competition, which will include foreign lenders who will gain access to the market.
Mihai Bogza explained that banks were faced with a series of significant costs that they cannot reduce, such as contributions to the Banking deposits guarantee fund or minimal compulsory reserves, which leave them with little room to manoeuvre. "In the end, we only have two options: either to cut rates on deposits even further, which we cannot do, or to maintain high rates on loans, as most banks have chosen to do."
razvan.voican@zf.ro
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