Home / BUSINESS / FINANCIAL / BANKS / Competition Council Report: The degree of competition in the banking system is high, but indebted customers are captive. Energy transport regulations induce distortions

Competition Council Report: The degree of competition in the banking system is high, but indebted customers are captive. Energy transport regulations induce distortions

The banking sector in Romania has a low to medium concentration, which indicates a relatively high degree of competition, but the high level of indebtedness leads to reducing the customers mobility, the Report of the Competition Council, entitled ‘Evolution of competition of key sectors in 2015’ reads.
The situation of the banking sector in the period under review indicates a favourable trend in terms of competition for the Romanian banking sector. In the last four years there is a tendency to reduce the differential between the interest rate on loans and deposits. Also, the concentration indices show a low to medium concentration in the sector.
“The tightening of crediting standards is not in itself a cause for concern regarding competition in the banking sector, but corroborating it with the high level of clients’ indebtedness leads to reducing the mobility of customers,” reads the report.
According to the document, the top ten credit institutions have had a cumulated market share relatively constant between 77.8% and 78.4%, and of 78.1% in 2014, down against 2013.
In addition, during the period under review, the market concentration index decreased significantly from 2008 to 2009, at the beginning of the crisis, after which it got stabilized. At the end of 2014, the index value was the lowest in recent years.
“These values indicate that the banking sector has a small to medium degree of concentration, which indicates a relatively high degree of competition. However, for a better interpretation of the degree of competition other indicators must be analyzed, such as bank customer mobility,” the report reveals.
Regarding the concentration, there is a big difference between the first two players and the others, but that difference has eroded over time.
According to the document, the first two large banks, BCR and BRD, had in the last six years market shares of 18-20% (BCR) and 14-16% (BRD). But both are declining, and still dominate, obviously, the Romanian banking environment in every major category (loans, deposits, assets, capital).
The third Bank is the bank, with a market share of about 10%, is Transilvania Bank, reads the Competition Council report.

The Electricity transmission tariff regulation induces some distortion on the market

The regulation of the electricity transmission tariff induces some distortions on the market that do not appear to be justified on grounds of safety and balance of the National Energy System, according to the annual report of the Competition Council.
According to the report, the electric power transport (including distribution), the Competition Council found that the current pricing mechanism, differentiated by geographical area affect competition without benefits for consumers, without being justified by the safety of the National Energy System. In Romania, the two components of the transmission tariff, meaning the tariff for entering the electricity network and the one for extracting electricity from the network are regulated differently in various geographical areas.
Regarding the electricity market, the competition authority considered necessary to introduce specific financial instruments for such markets, e.g. contracts for difference, contracts with options to help operators manage the financial risks arising from any inaccuracies that may appear between supply and demand.
According to Chiritoiu, the state should generally focus on areas where there is need of regulation.

About Victor Lupu