Breaking News
Ad-Free Version. Upgrade your experience. Save up to 40% More details

Romanian shares equal worst day on record after bank tax surprise

Stock MarketsDec 19, 2018 09:50AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
© Reuters. A man walks in front of Bucharest Stock Exchange headquarters in downtown Bucharest

By Luiza Ilie and Sandor Peto

BUCHAREST/BUDAPEST (Reuters) - Romania's stock market plunged 12 percent toward its worst day on record on Wednesday after the country's government announced shock plans to tax banking assets and cap gas prices.

The move instantly wiped out what had been one of Europe's best market performances of the year and caused trouble as far afield as Austria where banks such as Erste (VI:ERST) and Raiffeisen (VI:RBIV) that operate in Romania fell heavily.

The trigger was an announcement late on Tuesday by Romania's finance minister for a "tax on greed" that will cap money market lending rates to 1.5 percent.

There was also a plan to limit gas prices, enforce a turnover tax for energy and telecoms firms and enable Romanians to pull out of mandatory private pension funds after contributing for five years.

Bucharest's bluechip BETI bourse (BETI) fell 12.2 percent, with lenders Banca Transylvania (BX:ROTLV) and French Societe Generale (PA:SOGN) unit BRD Group shedding 18 percent and 10.3 percent, respectively.

Romania's centrist President Klaus Iohannis and investors slammed the measures, saying they would hit consumers and banks and urged the government to scrap the plans.

"This avalanche of fiscal measures ... is unacceptable and the symptom of a fracture between the government and economic agents," said the Coalition for Romania’s Development, which groups the country's largest investors’ associations.

The American Chamber of Commerce called them "irresponsible and reckless," and said they were "throwing the market into complete chaos".

The 12.2 percent slump saw the BETI match it worst day on record which was back in January 2009 and made an already bad year look worse for Central European markets, where only Bucharest had notched up any visible gains before its plummet.

So far this year Prague's benchmark (PX) has shed 7 percent while Warsaw's WIG20 (WIG20) has slid almost 6 percent as funds flowed into the rallying dollar from emerging market assets.

Bucharest's government went back and forth on its tax intentions last year, provoking more uncertainty among investors and the leu currency having already enforced consumption-friendly wage and pension hikes at the expense of infrastructure investment.

Morgan Stanley (NYSE:MS) said the banking tax implied a reduction of overall profits of more than 50 percent.

While other Central and Eastern European states have enforced new banking taxes in recent years, none had been tied to interbank rates.

"Linking a bank tax on ROBOR developments is also unprecedented and it could impair the central bank's control over its monetary policy," BCR said.

In Austria, Erste Bank , which gets 8.4 percent of its revenues from Romania's biggest bank Banca Comerciala Romana, saw its shares tumble as much as 10 percent, and remained the day's worst STOXX 600 faller despite recouping some losses.

Raiffeisen Bank, which has around 6 percent of its assets in Romania according to figures published last month, was last trading down 3.8 percent.

Romania's measures deepened Prague's losses as well.

The Prague bourse's main index fell 2.2 percent to its lowest level since July 2017 on Wednesday, driven by an 8 percent fall Erste's Czech-listed shares. (PR:ERST).

Budapest's BUX also dipped (BUX) though Warsaw (WIG20) bucked the regional trend with a slight gain.

In the currency markets, Romania's leu (EURRON=) shed 0.4 percent against the euro to trade at 4.6525, the zloty (EURPLN=) firmed 0.1 percent and the forint (EURHUF=) was steady as focus also turned to the U.S. Federal Reserve's final meeting of the year.

Signals that U.S. rate rises will slow next year could make emerging market assets look relatively more attractive. The recent steep drop in oil prices has helped corset inflation in Central Europe, reducing pressure on central banks to raise their interest rates.

Romanian shares equal worst day on record after bank tax surprise

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (1)
Mircea Sterescu
Mircea Sterescu Jan 28, 2019 11:17AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Budapest is in god gamn Hungary! Please align your geography with your investment and finance skills.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email