The Dreaming Professor

by Steven van Groningen on 12 January, 2012

Last week I wrote about cost and competition. This was partially a reaction to an article in Ziarul Financiar by a professor at the Academy of Economic Studies (ASE) in Bucharest. Not a week later I found an article in ZF by another prof.univ.dr. at ASE, Eduard Dinu.

New Year Wishes

This professor explains how last year he wished for “a functional market economy, based on real competition and not just a formal one” and concludes that, a year later, this has not been realized. You can find the article here. I don’t want to make this a series, but simply couldn’t resist the temptation to comment on some of the statements this professor makes. I do this for two reasons, first – him being a professor at – of all places – ASE and second- the fact that the article was published in Ziarul Financiar. Both impose, in my view, minimum standards in terms of quality that in my opinion have not been met.

Interest margins

To illustrate the lack of competition in the financial system the professor used the “method” of populist politicians. He takes the – variable – interest of a minor player for a certain type of loan and the – fixed – interest for a one year deposit. And concludes that  “the spread is almost 8 TIMES!!!” Besides  the fact that interest spreads are as a rule expressed as a percentage, this is not very scientific. He fails to explain, if there is no competition, why this bank (or the system as a whole) doesn’t make a profit. In reality it is very easy to calculate the interest margin for a bank or the banking system. A student can do it in a few minutes. Interest bearing assets and interest bearing liabilities as well as interest income and interest expense can easily be found in annual reports and other sources that are at the disposal of a professor at ASE. A simple calculation et voila, the interest margin for the Romanian banking system. Apparently this was too much work, or the outcome was not to the liking of the professor.

A tip for the professor, look for a bank with a product that offers zero interest for credit balances, your “spread” becomes infinite.

Stop Export Of Profits

Another interesting point is his “dream to stop or at least limit the export of profit realized by multinationals in Romania to their parent companies“. I would have thought that the freedom of repatriating profits is a fundamental part of a functional market economy, exactly the professor’s wish but he sees things apparently differently. What does he dream about? Should Romania leave the EU, or is he dreaming about changing  the Acquis Communautaire of the EU. Surely the ASE university professor knows that repatriation of profit is unlimited within the EU and outside the EU often covered by bilateral treaties.

Why should an investor who made a profitable investment not be allowed to take the profit, over which he paid taxes, out of the country. People invest their money in order to make a profit, if they cannot use the profit as they deem fit, why invest? What foreign investor would invest in Romania or any other country if they were not allowed to take out their profit, professor ? Nobody! Is that in the interest of the country?

A Loan Is Not Repatriation

More delicate is that the example given by our ASE professor doesn’t even seem to be about profit repatriation. He talks about a loan of 25 million EUR that the subsidiary of a Romanian company has given to it parent in France at preferential rates. How can a loan be repatriation? I am sure there are students at ASE that can explain the difference. It is absolutely normal for multinational companies to have a centralized treasury and centralized cash management.

Preferential Pricing ?

It becomes really embarrassing when the professor expresses his opinion that this 25 million EURO loan by the Romanian subsidiary is given to the French parent at “costuri absolut preferentiale” (no translation needed). He mentions a cost of ROBOR minus 0,15% for a 25 million EURO loan. ROBOR over that last year being about 5,5 % this leads to an interest rate of 5,35% ! If this can be called preferential, it is so for the Romanian subsidiary and not for the French parent! The local shareholders should be happy because the company would not get the same rate from a Romanian bank. Maybe the professor doesn’t understand the difference between ROBOR and EURIBOR ?


Is it really too much to ask to maintain some minimum standards when writing for the leading financial newspaper in Romania? This should be the platform for real discussion and debate. Based on facts, please. Don’t insult the intelligence of your readers. If I set my standards too high, let me know.


In the meantime I saw that Misu Negritoiu, CEO of ING and former professor at ASE himself, also reacted on the same article. Recommended reading here.

{ 16 comments… read them below or add one }

Gheo January 13, 2012 at 18:08

It’s already a while since Ziarul Financiar hosts a plethora of opinion, articles which have transformed it in a bastion of leftism and a financial tabloid. What is even worse is that they are a de facto monopol of daily business news. What is terribly worse is that businesses hurt by their excesses actually support it (advertising, conferences).


Edi January 18, 2012 at 14:12

Mr. Van Groningen, I think we should not be too harsh.

You are right, investment is about making money (and repatriating them), we should not be naive. As a whole, you are right to calculate the interest margin. You are right about loan/repatriation issue and the ‘preferential pricing’.

But, if we uncover it, we see that the main idea of the ZF article is:
The banks’ costs are transferred to the final client. Obviously true.
Some banks have high costs. Maybe true, but as a new client, you can choose which bank you like.

The real problem comes with the existing loans (I would not discuss OUG50 :) ) and the fact that some banks can transfer these costs to existing clients (since the margin is not fixed) or increase other costs. Because… : if there are some ‘aggressive’ banks in terms of new offerings, the others, in order to stay competitive, will have to lower the rates (for new loans), but the real costs should go somewhere…

Edi (not the professor :-) )


SvG January 27, 2012 at 10:30

Edi, you are right about cost being high in Romania. Banks pass costs on, they are an intermediary and want to make a reasonable profit as result of their activity. If cost of doing business increase in Romania increases, so will to cost of banking services, maybe not immediately but over time. If costs go down, banking services will become cheaper. At the moment the banking system is at a loss, so there is not a lot of room to make banking services cheaper until the cost come down first. Of course there are different types of costs, some are more likely to be passed on than others. I wrote about this here.


Viorel February 7, 2012 at 23:18

Who covers the cost of training unskilled employees in the banking industry ? I came back into the country couple months ago and I am thrilled to see that corruption penetrated the banking industry so fast.
You cannot get a job in a bank If You have no connections and no money to pay up.Do You know how much is that cost in your bank?
,…too much to tell here.


SvG February 8, 2012 at 00:16

For years I have been hearing stories about this but we have never succeeded in finding a real case in which this happened in our bank. I also heard from my own staff that they are being asked how they got their job. When they tell that they applied for the job, were interviewed and hired they are not always believed. It seems to be a myth that you need to know people or have to pay in order to get a job. There may be incidents but I don’t believe it is a practice. Rejection is not pleasant and maybe some people prefer to believe that these factors played a role. If you know of any case at our bank I would love to hear about it.


Viorel February 14, 2012 at 22:25

If You agree with me that a branch manager is hired based on his/her banking experience, we are on the same page. I would not hire an egineer who worked in public administration and leave out a guy with a degree in economics and couple years in banking.Am I right ?
I know how these kind of people in the bank can make me loose money.There are many wistleblowers in the bank that are afraid to talk (They are not protected, if You know what I mean.) They know many cases.

Andrei February 16, 2012 at 14:16

I do not think that to get a job in a bank you require money, but you definitely need connections (and usually well placed) otherwise you will not get to that interview. The more important the job (and better paid) the higher the connections needed.

Now, Mr. SvG, have you ever heard of top management publicly aknowledging that they managers are using hiring methods which are based on personal preferences and/or acquaintances. I appreciate the fact that you would love to hear about it, and I will take it literarily.

You also affirmed that you can not talk about the “system” but you can refer to the organisation you lead.
Let me describe two stories in plane, common, language which are deeply related to your organisation:
Manager “Z” has been suggested to hire person “X” because is Director’s Y nephew and we can not say to Director Y that his nephew is not qualified for the position, or that we want to employ another person as it appears more suitable for the position. You know, that Director Y is n+2 for me. Further down the road, three years passed and Manager “Z” who was weak enough and did not resist the pressure got fired as his n+2 considered that he was inefficient. Which indeed he was, but are we are not only as good as our team. You can imagine how efficient was his team.

Or another story for which I would like you to comment, should you consider it worth your time.
The Vp’s driver and his kid. Which nobody could touch or fire irrespectively of how lazy or (in)competent he is/was. Soo, he was paid to sit all day. Neverthelss, the kid managed to be soo competent that he got accused of fraud, and fraud is too hard to cover up.
And now I would like to quote one of your many speeches: “we need confidence”.

What confidence can one have when he understands the underlining! The same as in the politicians?
From some aspects local banks started to resemble public institutions, but without the stamp.

By the way, has the top management ever read a former employee’s exit interview, or it just looks at the numbers HR provides?
Nevertheless, despite my disappointment and the urge I felt to comment, I am well aware that a person is like a drop in the ocean, and the power he has to change / improve things is similar.

Parmalat June 2, 2012 at 14:24

“we have never succeeded in finding a real case in which this happened in our bank”

I did.

“If you know of any case at our bank I would love to hear about it”

If I apply and get a job in the anti-fraud department of Raiffeisen, that person will become my first investigation. Otherwise you’re gonna have to waterboard me to disclose such information that for myself personally can become useful even tomorrow morning at 9 am.

Parmalat June 2, 2012 at 14:14


I was about to bribe somebody from Raiffeisen (not for a job, but for something else), but in the end I… worked… with another bank that offered better conditions.

Thanks for remembering me, Viorel! Now Mr. van Groningen knows he’s got a weak link in his project :))

Yes, I’m gonna bribe my way into a banking job too! A wonderful objective for the remainder of the year. And if it’s gonna be Raiffeisen, I’m gonna invite Mr. van Groningen and have a beer together to explain him how I did it.


Sanjay February 9, 2012 at 08:12

Aren’t hneosty and transparency two different concepts? Someone can be honest without being transparent (e.g., answering only questions that someone asks).Transparency in this situation might sound like this: “We need to implement new fees because recent financial reforms have impaired our income.”While being honest might sound like this: “No free rides anymore. We will be charging customers fees appropriate to their level of activity.”


Pete January 22, 2012 at 00:32

Great article, and I love the pinch of sarcasm! You’re not saying it bluntly, but between the lines we can read that this so called ASE professor is a bloody moron (so he is, and I agree)

But what frightens me more, is that there are probably tens of more professors at ASE who are “stuck in the past” or “have no clue what they’re talking about”, but at the same time teaching these students who will become bankers in the future….

Talking about bankers (on any level), I would love to see you write about your opinion about why in Romania customer care and commons sense thinking is so much behind compared to other countries – regarding the banking sector- . I know you are bound by NBR regulations, but it seems change is slow in Romania

And perhaps you can shed some light on the fact on how you think banks (including Raiffeisen) can, legally – and from a compliance point of view-, reduce the ridiculous amount of paperwork involved with applying for or signing up for ANY banking product..

I am sincerely wondering which banker in Romania will step up to make a change. I am aware you are an Apple fan, and I wish you would act a bit more like the “Steve Jobs of banking” and really make it all a easier so it will “all just work” (as opposed to the current situation in Romanian banking).


SvG January 26, 2012 at 14:30

Thanks for the comment Pete. Indeed this would be an interesting topic to write about. After a 10 year struggle we are now finally getting rid of the rubber stamps and more is planned. Ihope it will not take another 10 years. I can imagine an “Apple” bank but the world if full of people that explain why this is not possible. I haven’t given up though…


Parmalat June 2, 2012 at 14:07

Reform in the banking sector is gonna start with the law of personal bankruptcy.

We’re gonna have that soon, the fight is not over.


Parmalat June 2, 2012 at 13:53

“dream to stop or at least limit the export of profit realized by multinationals in Romania to their parent companies“

He’s right to some extent.

Base resources like metals, oil, fresh water etc… are running scarce allover the world. So why should some private individuals be allowed to exploit these resources in the best conditions for them, while at the same time depriving the owning country of the profits?!

Tighter regulations will be imposed in the end and there will be no more private companies exploiting base resources, there will only be state-owned companies in these sectors.

“People invest their money in order to make a profit, if they cannot use the profit as they deem fit, why invest?”

Have you seen so many foreign direct investments in Romania? Cause the most I have seen are some state-owned companies built by Ceausescu and sold by post-1989 regimes for petty cash. The buyers have invested in some (Dacia – Renault), in some others they haven’t invested at all (SIDEX – Arcellor Mittal), some others they scrapped (ARO – a f*cking American) and they reached break-even in 6 months.

On top of that – they pay for peoples’ work in Romania 10 times less than they pay in their home countries.

Now tell me a good reason for which somebody who sees this situation doesn’t decide to nationalize everything back in 24 hours. I certainly would!

“Should Romania leave the EU?”

Yes, it’s still not late for Romania to leave this unholy alliance of exploiters and slaves, bearing no future.

If Romania had undertaken its own individual reforms, if Romania had maintained its profitable companies instead of selling them, if Romania had maintained its agricultural land under state control instead of crumbling it into millions of lots – the country would have been much better today in 2012 without the EU.

The country is occupied in every meaning of the word. Foreign companies bought assets for a fraction of the real price, they pay the lowest salaries in Europe, they repatriate profits, they leave whenever they want (Nokia, Kraft Foods etc…) showing no responsibility for the country and its people and for the little money that the country still has – the Americans come and say “hey Basescu, you buy 40 pieces of used F16 from us for this price. May you live well”.

Where’s our benefit from this equation?


Parmalat June 2, 2012 at 14:04

Did you know that in the 15/16 January 2012 protests people were shouting “death to banks and multinationals”?

Maybe you don’t feel it in the North of Bucharest, but there is a strong latent hatred towards foreigners in general (be them banks, companies, ambassadors, people running them etc…) in all the other directions.

People are starting to wake up, even if Romanians are the last people in the world whom we can suspect of possessing the asset called “personality”. The situation in Europe will change a lot 20-25 years from now.

If the EU has the money to keep Greece in AND offer decent conditions to the people – then every other country (Portugal and Spain mainly) will demand the same treatment.

If Greece goes out of the Euro zone in an extremist vote by its people – it will be a signal for Eastern Europe, it will be a signal for Russia and China to intensify pressures and initiatives in this area and break the zone away.

I’m really looking forward to this, all I want in this life is to have bread and water and live to witness the fall of the EU. I don’t want anything more.


Amy N. December 29, 2012 at 23:43

And I really intend to find an investor to help me publish my books/maybe books in English…could he be ‘Prince Charming’too and start doing it fast, as there are only 2 days left from this year and I HATE the never-ending repoetitive story during my whole life: ‘Wait for the spring..wait for the spring!!'(bieahx…)


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