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October 31, 2020
BUSINESS

EIF allows BCR, Raiffeisen Bank to provide EUR 315 M loans for SMEs

The European Investment Fund (EIF) has signed with Banca Comerciala Romana (BCR) and Raiffeisen Bank two guarantee agreements under the Joint European Resources for Micro to Medium Enterprises (JEREMIE) initiative, allowing the two banks to provide up to EUR 315 M of new loans to Romanian small and medium enterprises.


Following the two agreements, BCR and Raiffeisen Bank will offer financing at preferential conditions to a broad range of SMEs across Romania looking to invest or expand their business.


Within a timeframe of two years, Romanian SMEs will be to access JEREMIE finance with maturities of up to 6 years. BCR and Raiffeisen Bank will provide further information on the products available for SMEs under this agreement and how to access loans guaranteed through the JEREMIE initiative.


The two agreements – approximately EUR 215 M for BCR and EUR 100 M for Raiffeisen Bank – result from a ‘call for expression of interest’ launched in 2010, which attracted a high level of interest from local financial intermediaries operating in Romania. According to EIF Chief Executive, Richard Pelly, in order to select the best of the 9 applicants, the Fund checked and assessed thoroughly the expressions of interest received against set criteria, using the EIF’s expertise built up through providing guarantees to financial institutions across Europe over the past 15 years.


The central bank governor Mugur Isarescu declared recently that banks need to bring their strategies and business plans up to date and to pay more attention to SMEs.


“The agreement is great news for our almost 100,000 SME customer base. For the local businesses that came out from the recession this year is the right time to invest, therefore the guarantee agreement under the JEREMIE initiative will provide our clients with additional tools for development,” Steven van Groningen, Raiffeisen Bank’s CEO stated in a press conference. He said that in three weeks, the financial products will be ready by JEREMIE


In his turn, Dominic Bruynseels, BCR’s Chief Executive Officer, said: “We are a main bank for SMEs in Romania and are striving to support this sector vital to employment and country economic development. It is our objective to provide sustained funding to all good businesses viable on the long term. We stay further open for business, even more so this agreement strengthens and diversifies our funding base for the benefit of Romanian SMEs and the real economy at large.” The First Loss Portfolio Guarantee (“FLPG”) instrument, signed by the EIF and the two banks under the JEREMIE initiative, provides an adequate risk sharing balance for the two financial intermediaries, further allowing them to supply additional finance to SMEs in Romania.


Attended the event, Bogdan Dragoi, Secretary of State for Ministry of Public Finance, said the advantages of these agreements are to provide the security of the Fund and low cost for the final beneficiary. He also said that the government approved on Wednesday a guarantee ceiling for SMEs further EUR 300 M for 2011.


JEREMIE is a joint initiative launched by the European Commission (Directorate General Regional Policy) and the European Investment Bank Group to improve access to finance for SMEs in the EU within the Structural Funds framework for the period 2007 – 2013. JEREMIE enables the EU Member States and Regions to put money from the structural funds and also national resources into holding funds that can finance SMEs in a flexible and innovative way. The new initiative aims at developing and fostering the role of entrepreneurship within the EU.


BANK PROFIT TAX, COUNTERPRODUCTIVE


Moving on to another topic, the CEO of Raiffeisen Bank Romania, Steven van Groningen, stated that a bank profit tax was counterproductive and would only be managed by the credit institutions, while being paid, ultimately, by the clients.


“What we need in Romania is cheaper, not more expensive loans,” van Groningen stressed. This statement comes in response to the initiative of several Democrat Liberal Party (PDL) senators who proposed, last week, that all financial and credit institutions should pay an annual solidarity tax of 2.5 per cent of the preceding year’s earnings, which would be allotted to the social insurance budget, a measure to be applied for three years’ time.


The head of Raiffeisen Bank proposed the implementation of the international accounting standards, IFRS, because, in this way, the banking sector would automatically pay more in taxes. When asked whether there had been any discussions with the Government regarding the over-taxation of banks, van Groningen replied there hadn’t, adding there should be a normal consultation process before adopting any legislative initiative. In his view, such a tax is totally unwarranted as it applied to profit and it fines precisely those banks which had a balanced policy in the past and now make a profit.


At the same time, Groningen underlined that no bank in Romania had ever received money from the state. In turn, the BCR CEO, Dominic Bruynseels, stated that the taxation of banks was “a very poor idea” because it would reduce the banks’ chances to boost their capital, and, consequently, undermine their capacity to grant loans.

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