August 22, 2017 / 11:07 AM / 3 years ago

Romanian central bank defends lenders' solvency after PM's comments

BUCHAREST, Aug 22 (Reuters) - Romania’s banking sector is liquid and has a significantly higher solvency ratio than the European average, the central bank said on Tuesday after the prime minister cast doubts over the safety of deposits.

Prime Minister Mihai Tudose has said the government might release a list of banks that have not reported a profit, feeling “duty bound to tell Romanians which are the banks where there is a danger for them to hold deposits.”

Markets, including bank shares, have largely shrugged off Tudose’s comments. Earlier this month, the finance ministry released a draft decree that would introduce tax changes, including to rules for corporate profit tax, by imposing a cap of 30 percent for deductions on divested debt.

The move could hurt banks, which have massively divested non-performing loans in recent years at a fraction of their original value.

The central bank said Romania’s banking system had a solvency ratio of just under 20 percent at the end of June, compared with a European average of 14 percent and the legal minimum threshold of 8 percent.

The ratio between liquid assets and short-term liabilities stood at 251 percent, it said. Roughly 10.17 million people, or 99.7 percent of all individual deposit holders, had savings of under 100,000 euros, which are guaranteed under European norms.

“The data indicates ... there is no reason for concern over the safety of the deposits held in banks in Romania by the population and companies,” the central bank said.

The Romanian Banks’ Association and the Council of Banking Employers jointly said in a statement they were “concerned that the accusations could affect confidence in the banking sector on the one hand, but also banks’ confidence in the general business climate which has had its predictability hurt.”

The government has gone backwards and forwards on its tax intentions this year, often announcing measures without impact assessment and consultation and later backing out, provoking uncertainty among investors.

Already-enforced fiscal loosening has raised concerns with the European Union and the International Monetary Fund over missing budget targets. Brussels expects Romania to run the bloc’s largest deficit this year and next, as a proportion of gross domestic product. (Reporting by Luiza Ilie; Editing by Mark Trevelyan)

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