LONDON: Two major international development banks, the European Bank for Reconstruction and Development and the International Finance Corporation, have formally complained to the Romanian government about proposed new banking sector taxes.
In an unusual move, the London-based EBRD and IFC, which is part of the World Bank, sent a joint letter to Bucharest on Feb. 1 in which they outlined their concerns about the plans.
The EBRD has a number of large stakes in Romanian banks and the country's central bank governor, Mugur Isarescu, cited the EBRD's complaint on Monday as he delivered a second stinging attack on the plans in a less than a week.
"Those from the EBRD have a major problem, because in the case of Banca Transilvania for example, dozens if not tens of dozens of smaller foreign shareholders bought in based on their credibility."
"When they saw what happened on the stock exchange, they started asking questions of those who ... promoted the idea that Romania has a stable, responsible, predictable, reasonable legislation."
An EBRD spokesman said: "We confirm that we sent a letter together with the IFC on 1 February."
"We are not discussing the contents of our correspondence with the authorities in public and have no further comment at this stage."
The tax proposals, which also increased taxes on energy firms to compensate for rising state spending, sent Romania's stock market tumbling and the country's currency, the leu, to a record low in December when they were announced without warning.
Analysts say they could make banks unprofitable and they have also drawn particular criticism for a complex mechanism which ties them to Romanian money market rates.
The worry is the money market rates will be distorted by the changes which in turn would make it difficult for the central bank to judge the impact of its interest rate moves.
The EBRD has been a shareholder in Banca Transilvania, Romania's second biggest bank by total assets, since 2001 while last year it also bought a 19 percent stake in Piraeus Bank Romania from Greek parent Piraeus Group.
(Additional Reporting by Luiza Ilie in Bucharest; Editing by Peter Graff)