“Hungary warned by Erste chief on bank tax policy”- Financial Times, 11 October 2010, COVER PAGE!!!
I am reading the article on and off but I cannot find any essential information besides the message included also in the title. The article itself is a message, indeed, saying “we are staying but won’t finance”
But this is not news for us. The question, however, is whether the aggressive market gaining policy of the bygone century as well as billions of Euros having been spent on such policy and the work invested therein are vanishing into thin air or not. Will you kindly tell me what a bank maintaining a national network employing thousands of people but – in spite of all these –not placing loans will live on? (It was truly a poetic question.)
According to Andreas Treichl, there are not any problems as Erste has financed real customers (i.e. it invested not in commodity or money market products but in crediting). You can drop the same way, although not so quickly and spectacularly. There is an immediate depreciation on the purchase of a commodity market product, while the flop a defaulting customer – having even negative equity – is concerned in might be prolonged for years. Furthermore, such customers may be saved or wealth kept.
The situation can be simply described. It is not good to be a bank nowadays. All the banks are “perching” on a pile of deteriorated “products” while the value of the products cannot be written off on the balance sheets. Consequently, everyone is trying to oppose a little write-off to his current profit in order to have a narrow squeak to prevent bankruptcy.
It was the first thing – i.e. the usual business policy on the market – the Hungarian government has stirred in with the eviction moratorium. The second one was the bank tax. Instead of opposing the profit made to loss (write-offs or provision for expected liabilities), banks now have to spend on the bank tax. Today it is not good to be a bank.
Only to avoid misunderstandings: the Hungarian economy, of course, greatly needs the banks giving loans. On the other hand, in order to make profit, banks, will need the inhabitants and enterprises of European countries with 10 million inhabitants.
I think the Erste chief’s warning was a blunder. I mean it is a blunder if they (i.e. Erste bank) really intend to stay in Hungary and be determining market players. Our country has a(n) aggressive determined government having wide authority. Nobody/not any organizations should keep sending messages to this government, in my opinion. Austria is not too far and we could believe that a neighbouring country knows how things are getting on in Central Europe these days. Things seem to be doing it in a way other than earlier. We will experience even bank consolidation (through an asset management company or bad loan bank) or nationalization of banks (MKB Bank) and who knows what else. Therefore, the new political situation is going to lead to new market scaling. New players, new market sharing, new regulators and then new products. As I think, they should focus on all these and not join the ones clamouring outside. I make bold to say, diplomats should be employed instead of journalists.
The crisis will be over at some time in the future. Not now but surely some day. If it comes about, market presence will be important again.
P.s.: these days it is not only uneconomical to be a bank but also unpopular. This is a well-known fact in politics, too...
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