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BVB: Freezing listings of minority packages on capital market goes against Romania's interests
The legislative initiative that forbids for 2 years the listing of state companies restricts the state's capacity to optimally utilize capital markets to finance costs and investments, shows a release of the Bucharest Stock Exchange (BVB).
"The Bucharest Stock Exchange notes with regret the approval by Parliament of a legislative proposal regarding some measures to protect the national interests in the economic activity. BVB believes such a legislative initiative does not bring benefits to the Romanian state but, on the contrary, restricts its capacity to optimally utilize capital markets to finance costs and investments and, furthermore, delays the process of modernizing and streamlining the state's holdings portfolio. Ever since the adoption by the Senate of the mentioned legislative initiative, BVB has sent its points of view on it to political parties, to the members of the Chamber of Deputies' select committees, to the Government and Presidency, opinions argued for, among others, with examples of state companies that are listed on the local market," the release mentions.
"It's very important to take into account that, at this time, the private pension funds are the largest shareholder on the Bucharest Stock Exchange, with a percentage estimated between 25 pct and 30 pct of the total shares in trading. These pension funds hold the assets of the population. Thus, we can state that through the listings a transfer of assets from the state to citizens is conducted. We believe that this trend must continue and even develop, especially in regards to encouraging direct holdings of financial assets by the population," the release shows.
Romania’s parliament on Wednesday (10 June) approved a law that stops any sale of shares owned by the state for the next two years. The draft law was introduced by the socialist PSD party (opposition), which has the largest number of MPs and was opposed by the centre-right government.
If president Klaus Iohannis doesn’t veto it, the law will forbid any sale of state-owned stakes in any company or bank in which the government has some shares, regardless of the size of participation. Also, the law suspends any ongoing privatisation.
PSD cited the negative effects on the Romanian economy of the coronavirus crisis, and the potential declines in company values due to the economic context, to justify its proposal.
However, the PSD generally opposes the privatisation of state-owned companies, regardless of the economic situation.
”PSD will never allow the sale to foreigners of the last pearls of Romania’s economy – CEC Bank, Hidroelectrica or Nuclearelectrica,” party chief Marcel Ciolacu said last week.
PNL, the governing party, said it would contest the law before the Constitutional Court, adding that the president could veto the law so that it wouldn’t return to parliament.