High Percentage of Foreign Capital
Question: As you introduced, foreign capital assets accounted for 90% in Romanian banking sector. This percentage is so large for China. In China, foreign banks assets account for only a little bit more than 2% of the whole banking industry’s assets. 90% is too large to be understandable for our country. So I wonder what’s your comment on this proportion. Do you think this proportion is ok or not?
Answered by Executive President Florin Danescu: This is a good question. Before the crisis, we can say the Romanian economy was really helped by the banking investment foreign capital because the banking was built at that moment helped by the foreign investment. So it was good.
During the crisis, we understood that it was a mistake having such a big figure and also at that moment many voices talked about the need to have a big Romanian capital in the banking system. Of course it is an economic approach to have an accumulated level in Romania capital and foreign capital. But it was not the case in Romania. Before 2000, we had 4 big state banks in Romania. Unfortunately, today they are privatized and at the moment only CEC remains a big Romanian bank today. Today they are speaking about opening a new Romanian bank, maybe the development bank, i.e. transforming another one to serve better the Romania economy and the Romania people. Technically speaking, it’s not possible from my perception because if they want to serve a different market with the same regulations, it is impossible.
Anyway, this is the response. But this is a level today. We had pluses for this but there are also big minuses on this level. And Romania economy was not so strong maybe to open Romania banks.
Question: Before 1989, Romania is also planned economy. In your opinion, what’s the influence or impact of previous planned economy on your current economy, finance, or banking industry if any?
Answered by Executive President Florin Danescu: It is a nice discussion about this question. Taking from the perspective of the banking system, we started from a mono banking system. So the national bank was above the other banks, and the other banks practically run out as branch or something in several fields, such as agriculture, development, export, etc. 4 big banks are national banks. After that, of course we came to the free market, open to Europe, which was very difficult to connect. Of course it’s a need also today to have a planned economy, but not having the advantage of a market so disciplined as it is in a socialist market. It is my belief as a Romanian people which I understood also the differences between the socialist era and capitalist era.
For banks maybe these are easier approaches in such a market without the crisis of course. But for Romania today we are speaking more and more about the planned economy. It’s a joke. I joked already with my colleagues before you came here. Before 1989, the Romania industry reported all the time that they exceeded their plan 5 times more, 3 times more. It’s like a competition declaring how much they exceeded the plan. It was not good of course because it was not true and not real figures. But now we are joking that today we are even not able to succeed reaching the real figures at the moment. For example, that figure at that time is 10 billion euro was reported to be 50 billion euro. But today we are not able to reach that 10 billion euro. So this is about planned economy Romania today are maybe not planned.
Speaking of planned economy, of course we think national strategy, regional approach，industrial approach should be connected to the resources and needs of the level of national projects. We are rethinking about the planned economy. It’s a big minus of free market in my opinion almost for countries like Romania which is still developing not a developed already country. So when we are taking instruments from the free market but not being so well developed, you are paying a high price. Then it might be to increase the gap not to decrease the gap. So this is our big project now to see how to do to decrease the gap between the European countries and Romania instead of increasing it. But it is so difficult also for banking system because in a single banking union, we are taking the European rules from the banking applying in Romania while the market is not so well developed. The parity power is not so high as it is in other countries. The total bank assets in Europe to GDP are 360 percent, i.e. banking assets 3.5 times of GDP. But in Romania it is 0.6. So lower assets than GDP. If we take their rules, they will find us being very small, very young and not able to implement their rules. Also in Romania society, which I expect what: more and more loans to capture to reach the level of European countries through the loans multipliers effect.