Opinion of the European Central Bank of 10 May 2019 on the tax on banks’ financial assets and the interest rate benchmark for consumer credit agreements (CON/2019/18)
Date: 2019-05-10
Institutions: European Central Bank
Subjects: Romania, balance of payments, consumer credit, credit institution, financial stability, interest, national law, tax

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 10 May 2019 

on the tax on banks’ financial assets and the interest rate benchmark for consumer credit 

agreements 

(CON/2019/18) 

Introduction and legal basis 

On  20  March  2019  the  European  Central  Bank  (ECB)  received  a  request  from  Ministerul  Finanțelor 

Publice  (the  Romanian  Ministry  of  Public  Finances)  for  an  opinion  on  a  draft  Government  Emergency 

Ordinance  on  the  amendment  and  supplementation  of  three  legislative  acts  in  relation  to  the  tax  on 

banks’ financial assets and the interest rate benchmark for consumer credit agreements (hereinafter the 

‘draft  ordinance’).  On  29  March  2019  the  draft  ordinance  was  adopted  with  amendments  by  the 
Romanian  government  (hereinafter  the  ‘government  ordinance’) 1  and  is  currently  subject  to  the 

parliamentary approval procedure.  

The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the 

Functioning  of  the  European  Union  and  the  third  and  sixth  indents  of  Article 2(1)  of  Council  Decision 
98/415/EC2,  as  the  government  ordinance  relates  to  Banca  Naţională  a  României  (BNR)  and  rules 

applicable  to financial  institutions insofar as they materially influence the stability  of financial  institutions 

and  markets.  In  accordance  with  the  first  sentence  of  Article 17.5  of  the  Rules  of  Procedure  of  the 

European Central Bank, the Governing Council has adopted this opinion. 

1. 

Purpose of the government ordinance 

1.1  The government ordinance was introduced to revise certain features of the tax on banks’ financial 
assets which  was  introduced  in  late December 2018 3 and  to replace the  interest rate  benchmark 

referenced  in  consumer  credit  agreements  with  variable  interest  rates  denominated  in  Romanian 
lei 4.  

1  

2  

3  

4  

Ordonanţa de urgenţă a Guvernului nr. 19/2019 pentru modificarea şi completarea unor acte normative, publicată în 
Monitorul Oficial al României, Partea I, nr. 245 din 29 martie 2019. 
Council  Decision  98/415/EC  of  29 June  1998  on  the  consultation  of  the  European  Central  Bank  by  national 
authorities regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42). 
Government Emergency Ordinance 114/2018 of 28 December 2018 on the establishment of certain measures in the 
field  of  public  investment  and  of  certain  fiscal  and  budgetary  measures,  the  amendment  and  supplementation  of 
certain legislative acts and the prolongation of certain time limits (Ordonanţa de urgenţă a Guvernului nr. 114/2018 
privind  instituirea  unor  măsuri  în  domeniul  investiţiilor  publice  şi  a  unor  măsuri  fiscal-bugetare,  modificarea  şi 
completarea unor acte normative şi prorogarea unor termene, publicată în Monitorul Oficial al României, Partea I, nr. 
1116 din 29 decembrie 2018). 
By  virtue  of  Government  Emergency  Ordinance  50/2010  of  9  June  2010  on  credit  agreements  for  consumers 
(Ordonanţa  de  urgenţă  a  Guvernului  nr.  50/2010  privind  contractele  de  credit  pentru  consumatori,  publicată  în 
Monitorul Oficial al României, Partea I, nr. 389 din 11 iunie 2010) and Government Emergency Ordinance 52/2016 of 
14 September 2016 on credit agreements offered to consumers for immovable property, as well as for amending and 
completing Government Emergency Ordinance 50/2010 on credit agreements for consumers (Ordonanţa de urgenţă 

 
 
 
 
                                                 
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1.2  The tax on banks’ financial assets 

The objectives  underlying the revised features of this  tax are to increase financial  intermediation, 

reduce  the  cost  of  credit  for  households  and  stimulate  savings.  The  government  ordinance  thus 

aims to encourage credit  institutions to contribute to achieving these objectives  by: (a) increasing 

lending  to  non-financial  corporations  and  households;  and  (b)  reducing  the  difference  between 

interest rates for loans granted to non-financial corporations and households and the interest rates 
for deposits made by non-financial corporations and households 5. 

1.3  The tax on banks’ financial assets is levied on credit institutions which are Romanian legal entities, 

including their foreign branches, and Romanian branches of foreign legal entities. The proceeds of 

the  tax  are  considered  State  budget  revenue  and  the  tax  expense  will  be  deductible  when 
establishing the banks’ fiscal result in accordance with the Law on the Fiscal Code6. 

1.4  Following  the amendments introduced by  the government ordinance, the tax base is represented 

by  the  banks’  financial  assets  at  net  value  as  recorded  in  the  balance  sheet  at  the  end  of  the 

semester  or  of  the  year  for  which  the  tax  is  due,  from  which  the  following  categories  of  financial 

assets are subtracted: (a) cash; (b) cash balances with central banks at net value, excluding non-

performing exposures; (c) non-performing exposures at net value; (d) debt securities issued by the 

public  administration  at  net  value,  excluding  non-performing  exposures;  (e)  loans  and  credit 

advances to the public administration at net value, excluding non-performing exposures; (f) loans to 

the  non-governmental  sector  which  are  guaranteed  by  the  central  public  administration  at  net 

value, excluding non-performing exposures; (g) loans to credit institutions, related receivables and 

amounts  to  be  depreciated  at  net  value,  excluding  non-performing  exposures;  (h)  deposits  with 

credit institutions, related receivables and amounts to be depreciated at net value, excluding non-

performing  exposures;  (i)  nostro  accounts  with  credit  institutions  and  related  receivables  at  net 

value,  excluding  non-performing  exposures;  (j)  reverse-repo  operations  and  borrowed  securities, 

related  receivables  and  amounts  to  be  depreciated  at  net  value,  excluding  non-performing 

exposures. 

1.5  Following the amendments introduced by the government ordinance, the tax rate is either 0.4% of 

the tax base per year for banks with a market share above or equal to 1%, or 0.2% of the tax base 

per  year  for  banks  with  a  market  share  below  1%.  For  this  purpose,  a  bank’s  market  share  is 

calculated  as  the  ratio  between  the  total  value  of  the  bank’s  assets  and  the  total  amount  of 

aggregate assets for the banking system, including branches. 

1.6  Following  the  amendments  introduced  by  the  government  ordinance,  the  tax  on  banks’  financial 

assets is limited to the accounting profit as recorded at the end of the semester or year for which 

the tax is due.  Moreover,  banks that register  losses  at the end of the semester or  year for  which 

this tax is due will not be subject to it. Additionally, banks on which lending restrictions have been 

a  Guvernului  nr.  52/2016  privind  contractele  de  credit  oferite  consumatorilor  pentru  bunuri  immobile,  precum  şi 
pentru  modificarea  şi  completarea  Ordonanţei  de  urgenţă  a  Guvernului  nr.  50/2010  privind  contractele  de  credit 
pentru consumatori, publicată în Monitorul Oficial al României, Partea I, nr. 727 din 20 septembrie 2016). 

Preamble to the government ordinance and Explanatory memorandum to the government ordinance as submitted to 
Parliament. 
Legea  nr.  227/2015  privind  Codul  fiscal,  publicată  în  Monitorul  Oficial  al  României,  Partea  I,  nr.  688  din  10 
septembrie 2015. 

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imposed  by  the  supervisory  authority  for  the  period  in  which  those  restrictions  apply  will  not  be 

subject to this tax.    

1.7  Furthermore, in line with its stated objectives, the government ordinance introduces two categories 

of tax deductions: (a) a tax deduction of up to 50% in return for contributing to increasing financial 

intermediation  by  increasing  lending  to  non-financial  corporations  and  households  in  accordance 

with an annually-established governmental target; and (b) a tax deduction of up to 50% in return for 

reducing interest rate margins, either below an annually-established reference margin rate or in line 

with an annually-established governmental target. For this purpose the interest rate margin is the 

difference between the weighted average interest rate for loans denominated in lei to non-financial 

corporations and  households and the  weighted average  interest rate for deposits denominated  in 

lei received from non-financial corporations and households. 

1.8  Accordingly, as regards the first category of tax deduction, the government ordinance provides for 

a  pro-rata  tax  reduction  of  up  to  50%,  if  the  balance  of  loans  to  non-financial  corporations  and 

households at the end of the semester or year for which the tax is due increases in relation to the 

balance  of  the  same  type  of  credits  at  the  end  of  the  preceding  year.  The  tax  deduction  is 

proportional  to  the  ratio  between  the  increase  in  lending  to  non-financial  corporations  and 

households  and  the  lending  increase  target  established  for  the  year  for  which  the  tax  is  due.  If 

lending  to  non-financial  corporations  and  households  decreases,  there  is  no  tax  deduction.  In 

addition, the  benchmark against  which the increase  in lending is calculated for  the following  year 

will  not  be  reduced,  but  instead  maintained  at  the  level  of  the  balance  of  loans  at  the  end  of  the 

year preceding the year in which lending to non-financial corporations and households decreased 

until the balance of loans to non-financial corporations and households at the end of the semester 

or year for which the tax is due exceeds that benchmark. 

1.9  As  for  the  second  category  of  tax  deduction,  the  government  ordinance  provides  for:  (a)  a  tax 

deduction  of  50%,  if  the  interest  rate  margin  for  the  semester  or  year  for  which  the  tax  is  due  is 

below  or  equal  to  the  reference  interest  rate  margin  established  for  the  year  for  which  the  tax  is 

due; or (b) a pro-rata tax deduction of up to 50%, if the interest rate margin calculated at the end of 

the  semester  or  year  for  which  the  tax  is  due  decreases  in  relation  to  the  interest  rate  margin 

calculated at the end of the preceding year. The tax deduction is proportional to the ratio between 

the decrease in the interest rate margin and the margin decrease target established for the year for 

which the tax is due. If the interest rate margin increases, there is no tax deduction. In addition, the 

benchmark  against  which  the  decrease  in  the  interest  rate  margin  is  calculated  for  the  following 

year will not be increased, but instead maintained at the level of the interest rate margin at the end 

of  the  year  preceding  the  year  in  which  the  interest  rate  margin  increased  until  the  interest  rate 

margin at the end of the semester or year for which the tax is due falls short of that benchmark. 

1.10 

In addition to these tax deductions, the government ordinance provides for an exemption from the 

tax for the first semester in any  of the following cases: (a)  where the lending increase target  has 

been fully met; (b) where the margin decrease target has been fully met; (c) where the aggregated 

percentage of the lending increase and of the interest-margin decrease is at least 100%. 

1.11  Finally, the government ordinance specifies that the lending increase target, the margin decrease 

target  and  the  reference  interest  rate  margin  are  established  annually  by  the  Romanian 

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government,  upon  the  proposal  of  Ministerul  Finanțelor  Publice  on  the  recommendation  of 

Comitetul  Național  pentru  Supravegherea  Macroprudențială  (the  National  Committee 

for 

Macroprudential Oversight). For 2019, the government ordinance sets the lending increase target 

and the margin decrease target at 8% and the reference interest rate margin at 4%. 

1.12  The interest rate benchmark for consumer credit agreements 

The  government  ordinance  aims  to  increase  the  transparency  of  the  interest  rate  benchmark 

referenced  in  consumer  credit  agreements  with  variable  interest  rates  denominated  in  lei  by 

replacing the Romanian Interbank Offer Rate with a new benchmark calculated exclusively on the 
basis of interbank transactions 7. 

1.13  The government ordinance stipulates that the new interest rate benchmark is to be published each 

working day on BNR’s website. 

1.14  The  government  ordinance  further  stipulates  that  the  new  interest  rate  benchmark  will  be  an 

average  of  interest  rates  weighted  against  the  volumes  of  interbank  market  transactions.  The 

benchmark is calculated at the end of each quarter as an arithmetic mean of the daily interest rates 

determined  for  the  preceding  quarter  and  is  applied  by  each  credit  institution  for  the  following 

quarter.       

2. 

Observations regarding tax on banks’ financial assets   

2.1  Need for impact assessment 

The  ECB  has  consistently  advised  that  the  introduction  of  special  taxes  on  banks  or  financial 
institutions should be preceded by a comprehensive impact assessment8. A comprehensive impact 

assessment  of  the  tax  on  banks’  financial  assets  is  necessary  to  ensure  that  the  benefits  of  the 

fiscal  measure  outweigh  its  costs  not  only  in  view  of  the  potentially  negative  effects  on  financial 

stability and the economy, but also in view of the potential implications for bank lending conditions 

and for the transmission of monetary  policy. In this respect, the  ECB  notes that  the use of timely 

and  meaningful  impact  assessments  was  also  emphasised,  albeit  more  broadly,  in  Council 

Recommendation  of  13  July  2018  on  the  2018  National  Reform  Programme  of  Romania  and 
delivering  a  Council  opinion  on  the  2018  Convergence  Programme  of  Romania9,  according  to 

which Romania should take action to increase the predictability of decision-making by enforcing the 

systematic and effective use of regulatory impact assessments and stakeholder consultations and 

involvement in the design and implementation of reforms. 

2.2  Effects on financial stability 

Without  prejudice  to  the  government’s  objective  of  increasing  financial  intermediation,  the 

introduction of the tax would benefit from a prior impact assessment so as to mitigate potential risks 

to financial stability. Given the incentive mechanism introduced by the government ordinance, such 

7  
8  

9  

Explanatory memorandum to the government ordinance as submitted to Parliament. 
See  paragraph  3.2.2  of  Opinion  CON/2010/62,  paragraph  3.3  of  Opinion  CON/2011/31,  paragraph  2.2  of  Opinion 
CON/2013/44  and  paragraph  2  of  Opinion  CON/2016/1.  All  ECB  opinions  are  published  on  the  ECB  website  at 
www.ecb.europa.eu. 
Council  Recommendation  of  13  July  2018  on  the  2018  National  Reform  Programme  of  Romania  and  delivering  a 
Council opinion on the 2018 Convergence Programme of Romania (OJ C 320, 10.9.2018, p. 98). 

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an  assessment  should  also  take  into  account  the  risk  that  the  provision  of  credit  to  non-financial 

corporations and households might be steered by the potential tax benefits. Such an assessment 

should also consider whether the design of the tax gives credit institutions an incentive to change 

their  risk  profile  by  restructuring  their  portfolios.  The  provision  of  credit  should  primarily  rely  on  a 

robust  prudential  system  and  full  compliance  with  requirements  for  the  creditworthiness  of 
borrowers 10.  This  latter  approach  would  contribute  to  an  appropriate  distribution  of  loans  in  the 

economy,  and  this  in  turn  would  safeguard  banks’  balance  sheets  from  future  potential  losses. 

Over time, this approach would also aid in fostering sustainable financial stability, and contributing 

to  the  safety  and  soundness  of  banks.  Finally,  the  incentives  created  by  the  revised  tax  must  be 

aligned with macroprudential policy objectives and measures implemented in Romania. 

2.3  Effects on the Romanian economy 

A thorough and timely impact analysis of the practical implications of the government ordinance is 

warranted, also in view of the fact that introducing ad hoc taxes on banks may create uncertainty 

for their business and eventually pose risks to the provision of credit, which could adversely affect 
long-term growth in the real economy11. In line with the stance maintained in the past12, the ECB 

cautions against incentives in loan provision that may lead to distortions in the efficient allocation of 

loan supply and further sectoral imbalances in the real economy.  

2.4 

Implications for bank lending conditions and for the transmission of monetary policy 

An inefficient allocation of credit is detrimental not only to financial stability and  the real economy 

but also to the monetary policy transmission mechanism. The government ordinance introduces tax 

deductions for banks that lend more, or at low margins, to the real sector. Any measure aimed at 

stimulating lending activity, if not appropriately designed, may cause distortions in the allocation of 

credit.  Such  measures  may  result  in  banks  becoming  overly  lenient  with  regard  to  their  lending 

standards in order to meet their lending volume targets. At the opposite extreme, in an attempt to 

meet  their  targets  in  terms  of margin  compression,  banks may  disproportionately  tilt  their  lending 

supply  away  from  relatively  riskier  but  still  creditworthy  borrowers  involving  high  risk  premia,  e.g. 

small  and  medium-sized  enterprises,  which  rely  solely  on  bank  lending  and  have  no  access  to 

capital market finance. The likelihood that such side effects materialise depends  on the details of 

the calibration and on the credit risk and demand conditions that each intermediary is facing.  

2.5  While the tax introduced by the government ordinance is designed to have a lower impact on banks 

which lend more to the real economy, it can nonetheless be expected to have an overall adverse 

impact  on  their  profitability.  Since  retained  earnings  are  an  important  source  of  capital,  a  tax  on 

banks’  activity  could  have  implications  on  their  intermediation  capacity  that  should  not  be 

neglected.  Thus,  the  impact  assessment  should  also  take  into  account  the  overall  equilibrium 

effects  of  the  fiscal  measure,  even  more  so  in  a  country  relying  on  the  presence  of  foreign 

intermediaries who can more easily avoid the increased tax burden by geographically reallocating 

their assets. 

10  
11  
12  

See paragraph 3.2 of Opinion CON/2011/31. 
See paragraph 2.1 of Opinion CON/2016/1 and paragraph 3.2.2 of Opinion CON/2010/62. 

See paragraph 3.1 of Opinion CON/2011/31. 

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2.6  Finally,  the  cost-benefit  analysis  should  also  consider  the  financing  conditions  for  the  real  sector 

that  play  an  important  role  in  the  monetary  policy  transmission  mechanism  and  might  de  facto 

represent  an  intermediate  target  for  central  banks. The  same  applies  to  the  volume  of  lending  to 

the  real  economy,  which  can  be  explicitly  utilised  as  an  intermediate  target  of  monetary  policy 

measures. Consequently, the incentive mechanism provided for under the government ordinance, 

which  is  targeting  financing  conditions  and  lending  activity,  should  be  assessed  to  determine 

whether it may have any implications on BNR’s toolbox. 

3. 

Observations regarding interest rate benchmark for consumer credit agreements 

3.1  The ECB welcomes the government ordinance’s aim to introduce a transaction-based benchmark 

for  consumer  credit  agreements  with  variable  interest  rates  denominated  in  lei  (the  ‘new 

benchmark’).  This  is  in  line  with  the  principles  underlying  the  Union  regulatory  framework  on 

financial benchmarks, in particular Regulation (EU) 2016/1011 of the European Parliament and of 
the  Council13,  and  other  recognised  international  best  practice 14.  Where  the  input  data  is 

transaction-based data, less discretion can be exercised in providing input data and therefore the 
opportunity to manipulate the data is reduced15.  

3.2  However, the government ordinance should take into account the fact that actual transaction-based 

input data are to be used only where available and appropriate. If transaction data is insufficient or 

inappropriate  to  accurately  and  reliably  represent  the  market  or  economic  reality  that  the 

benchmark  is  intended  to  measure,  input  data  which  is  not  transaction  data  may  also  be  used, 
including estimated prices, quotes and committed quotes, or other values 16. 

3.3  Furthermore,  the  compatibility  of  the  government  ordinance  with  Regulation  (EU)  2016/1011  and 
related  provisions  of  Directive  2014/17/EU  of  the  European  Parliament  and  of  the  Council17  and 
Directive 2008/48/EC of the European Parliament and of the Council18 should be ensured. Without 

prejudice to the European Commission’s competence to monitor the implementation of Union law, 

the  ECB  notes  that,  although  interest  rate  benchmarks  are  referenced  in  consumer  credit 

agreements  with  variable  interest  rates  denominated  in  foreign  currencies  or  denominated  in  lei 

(such  as  the  new  benchmark),  the  government  ordinance  does  not  introduce  information 

requirements concerning the names of the respective benchmarks and of their administrators and 
the potential impact of the means by which the benchmarks are determined on the consumer19.  

13  

14  

15  
16  
17  

18  

19  

Regulation  (EU)  2016/1011  of  the  European  Parliament  and  of  the  Council  of  8  June  2016  on  indices  used  as 
benchmarks in financial instruments and financial contracts or to measure the performance of investment funds and 
amending Directives 2008/48/EC and 2017/14/EU and Regulation (EU) No 596/2014 (OJ L 171, 29.6.2016, p. 1).  
See the Board of the International Organization of Securities Commissions (OICU-IOSCO), Principles for Financial 
Benchmarks (July 2013), available at www.iosco.org. 
Recital 26 of Regulation (EU) 2016/1011. 

Article 11(1) and Annex I of Regulation (EU) 2016/1011. 
Directive 2014/17/EU  of the European  Parliament  and of the Council of 4 February  2014  on credit agreements for 
consumers  relating  to  residential  immovable  property  and  amending  Directives  2008/48/EC  and  2013/36/EU  and 
Regulation (EU) No 1093/2010 (OJ L 60, 28.2.2014, p. 34). 

Directive  2008/48/EC  of  the  European  Parliament  and  of  the  Council  of  23  April  2008  on  credit  agreements  for 
consumers and repealing Council Directive 87/102/EEC (OJ L 133, 22.5.2008, p. 66). 
See Article 5(1), third subparagraph, of Directive 2008/48/EC and Article 13(1), second subparagraph, point (ea) of 
Directive 2014/17/EU.  

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3.4  The  ECB  further  notes  that  the  government  ordinance  does  not  specify  key  features  of  the  new 

benchmark,  such  as  the  name  (and  acronym)  and  the  administrator  of  the  new  benchmark,  nor 

does  it  specify  the  full  methodology  for  the  determination  of  the  new  benchmark  or  where  such 

details  are  to  be  made  available.  If  the  administrator  of  the  new  benchmark  envisaged  under  the 

government ordinance were to be BNR, the ECB notes that Regulation (EU) 2016/1011 does not 
apply to central banks20, as central banks already meet principles, standards and procedures which 
ensure  that  they  exercise  their  activities  with  integrity  and  in  an  independent  manner21. 

Accordingly, if BNR were to be the designated administrator the government ordinance should not 

impinge on BNR’s discretion to develop the methodology for determining the new benchmark so as 

to ensure its accuracy, integrity and reliability. When central banks provide benchmarks, it is their 

responsibility to establish appropriate internal procedures in order to ensure the accuracy, integrity, 

reliability  and  independence  of  those  benchmarks,  taking  into  account  international  best  practice 
where relevant and appropriate22. The ECB would need to be consulted under Articles 127(4) and 

282(5) of the Treaty with regard to draft national legislation that confers further tasks on BNR in this 

respect.  

This opinion will be published on the ECB’s website.  

Done at Frankfurt am Main, 10 May 2019. 

[signed] 

The President of the ECB 

Mario DRAGHI 

20  
21  
22  

Article 2(2)(a) of Regulation (EU) 2016/1011. 
Recital 14 of Regulation (EU) 2016/1011. 
See the Board of the International Organization of Securities Commissions (OICU-IOSCO), Principles for Financial 
Benchmarks (July 2013), available at www.iosco.org. 

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