THE AUSTRIAN OWNED BANKS IN ROMANIA I hope we won't have to pay the bill for the greed of the banking system

• Traian Băsescu criticized Austrian banks harshly

Romania shouldn't have to pay for the "greed" of the banking system, which made huge profits, president Traian Băsescu said yesterday, at the conference "Analyzing Romania's future economic potential", organized by "The Economist" group. He severely criticized Austrian banks, saying that, if parent banks were to pull the plug on funding their funding from the domestic subsidiaries, this would be considered "a lack of fair-play".

Yesterday, the president expressed his concern over the possible behavior of some banks and said: "I want to believe that the announcement of the Austrian Central Bank concerning the drop in the cash flows towards the countries outside the Eurozone was a mistake or the result of the inability to gauge the effects of such a statement". Traian Băsescu added that banks made huge profits in Romania, between 2000 and 2009, and if they are getting ready to deprive the country of funding, that "would be a lack of fair-play".

He said: "I want to believe that the states which joined the European Union later will not be made to pay the cost of banks' greed. I want to remind our European friends how much they have conditioned Romania's accession to the EU on the privatization of the banking system. Gentlemen, you made huge profits in Romania, between 2000 and 2009, and if you are now getting ready to leave the Romanian economy without financing in this period of crisis, we will consider it a lack of fair-play towards Romania.

I want to believe that this will not happen, that the countries which joined the European Union later, will not be made to pay the price for the greed of the banking systems, for the carelessness, lack of responsibility from the time when all it took to get a loan was an ID card. European mechanisms for the capitalization of banks have been created, and you must use them, not choke Romania's economy by reducing the flows of capital needed by the state budget, and especially by the private economy".

On Monday, the Austrian Central Bank presented a set of measures which provide that, in Eastern Europe, the subsidiaries of Austrian banks would finance lending using local resources, rather than those of the parent banks.

Erste Group Bank AG, Raiffeisen Bank International AG (RBI), UniCredit SpA Bank Austria will no longer be allowed to lend more than 1.1 times the deposits and wholesale funding that banks' local units are able to raise on their own, in countries such as Hungary, Romania and Ukraine, starting next year, according to regulations of the Central Bank of Austria.

In Romania, Erste controls the Romanian Commercial Bank (BCR), UniCredit Bank Austria runs UniCredit Ţiriac Bank, and RBI owns Raiffeisen Bank.

At the end of the first semester, the share capital of Austrian banks accounted for 21% of the total foreign equity of the lenders operating on the market. The same level was also seen in 2010, whereas in 2009, Austrian banks accounted for 23%, and for 24.5% in 2008.

• Steven van Groningen: There will be no consequences on Romania

The announcement of the Austrian Central Bank will not affect Romania, as the decisions on financing lie with the individual banks, Steven van Groningen, the president and CEO of Raiffeisen Bank Romania, said yesterday, at the conference "'Analyzing Romania's future economic potential'', organized by "'The Economist'' group.

He said: "We are talking a lot about mere speculation. A press release was published, with rather vague contents. From our point of view, there will be no consequence for Romania. It is a situation which depends on each individual bank. I don't think that the suggestion is a mistake and we do not know anything about its consequences, if any".

The CEO of Raiffeisen Bank Romania added that banks need to find the balance between lending and deposits.

• • Dominic Bruynseels: Erste will keep its exposure to Romania

Dominic Bruynseels, CEO of the Romanian Commercial Bank, reacted to the accusations of the president by saying yesterday, that Erste Bank keeps its exposure to Romania, and its main objective is to finance the infrastructure investments.

He said: "We will keep our exposure to Romania. The financing of the infrastructure is a priority for us and we will focus on these investments in the future. (...) It is clear that there is pressure from the parent banks, but the problem is how we will handle it. We will need to decide how to use that money".

The CEO of BCR added that, in the coming period, lending in lei to SMEs will be prevalent: "There will be pressure and the cost of lending will increase, in the case of major loans. SMEs will not see major changes in lending terms. There may be a focus on loans denominated in lei, rather than in Euros, which is a good thing".

• • Analyst Daniel Ionescu:

"The statements of President Traian Băsescu do not take into account the realities in Europe. Furthermore, his stance comes extremely late, given the fact that almost 90% of the Romanian banking system is privatized and belongs to investors. Investors' will to repatriate their capital are a faithful reflection of the way that the banking system and the economy work.

The lack of stimuli in the real economy and the high taxation, when considering the current crisis redirects capital towards areas where it can be put to better use. The repatriation of part of the capital invested in the Romanian banking system is a reality which takes into account the economic and financial situation in Romania and the solution to keep in the country is to offer fair stimuli in the form of responsible economic and financial policies which would generate added value output and end user consumption which would generate the need for financing from the banking system.

When the Agricultural Bank was privatized as part of a very "sweet' deal, no one said a word, jut like when BCR and the other banks in the system were privatized".