Local banking market faces up to challenges and changes

The local banking system has been going through a period of significant challenges and changes as a result of the international turmoil in the past few months. New faces in the top management of some institutions and Austrian lenders’ intention to diminish their exposure to the Eastern Europe market are the hottest issues on the local banking market now.

Anda Sebesi

Challenges….
The Central Bank of Austria and the FMA – the authority that regulates the local financial market – published in November last year a set of regulations for lenders that have significant international business, like Erste, Raiffeisen and UniCredit Bank Austria. Authorities in Vienna asked the lenders to limit their Eastern European exposure in order to reduce risk, ensuring that future lending activity by the subsidiaries in the region does not exceed 110 percent of the deposits and financing attracted on each market.

The reality is that the subsidiaries of European banks in Eastern Europe relied significantly on the credit lines from mother-groups meant to sustain their lending activity. According to the World Bank, this is proven by the high credit/deposits ratio posted by many countries like Latvia (240 percent), Lithuania (129 percent), Romania (127 percent) and Russia (121 percent). But the World Bank is also concerned about the impact that the measures proposed by Austria may have on economies in the region. “It is worrisome that the bank regulators in Austria led the Austrian banks to limit their lending to their subsidiaries from Central and Eastern Europe, while many lenders from developed Europe announced independently their intention to reduce their operations  in Europe and Central Asia,” said the World Bank report, quoted by Mediafax.

Moreover, the European Commission is now analyzing if the regulations proposed in November last year by the Viennese authorities break European Union directives about the free circulation of capital, according to Austrian newspaper Der Standard, cited by Mediafax. The publication also says that many ministers of finance from Eastern Europe “have alerted” the European Commission through official letters, warning that these measures may affect economic growth in the region.

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Specialists say those countries that have a significant Austrian presence in their banking market, such as Romania, and which have a financial system that is vulnerable to the Euro zone crisis, may suffer a significant deterioration in their financing conditions as a result of the proposal from Vienna. “Depending on how mandatory this directive is, it could significantly constrain the conditions for financing in Albania, Bosnia-Herzegovina and Romania – countries where the Austrian banks are very active,” cautions the World Bank report. According to the Annual Report for 2010 issued by the National Bank of Romania (NBR), Austria had a 16.3 percent participation in the share capital of credit institutions in Romania, at the end of December 2010, second among the countries that own such stakes on the local market, after Greece (25.5 percent) and followed by the Netherlands (11.8 percent).

But there is also good news. Recently Erik Berglof, the chief economist of the EBRD, said that Austria had agreed to be more flexible about restricting lending activity in Eastern Europe. In addition, Central and Eastern European countries, EU authorities and international financial institutions such as the IMF, World Bank and EBRD will try to prevent the exodus of Western lenders from emerging markets by creating a new initiative called Vienna 2.0. According to Reuters, cited by Mediafax, its goal is to slow down the pace of exposure reduction and the risk in order to avoid a financing crisis in emerging Europe and not to maintain exposure on these markets.

…and changes
The local market was hit last week by the news that Robert Rekkers, one of the most long serving managers in the Romanian banking industry, has decided to resign from his position of general manager at Banca Transilvania, after almost a decade with the lender. He will be replaced by Peter Franklin, who has 37 years of experience in the financial-banking industry.

At the same time, Banca Comerciala Romana (BCR) extended its management board from five members to seven, by including the position of chief operating officer and a separate position for treasury, capital markets & group large corporates. The supervisory board of BCR has appointed Tomas Spurny, 46, chief executive officer of BCR, with April 1, 2012 as the targeted date of handover from Dominic Bruynseels, the current CEO whose mandate is expiring. Spurny is an internationally experienced banker who, over the last ten years, has been the CEO of several major financial and banking institutions in Slovakia, the Czech Republic and Hungary, contributing to their success on the local markets. Most recently he was CEO at CIB Bank Hungary, a member of the Italian financial group Intesa Sanpaolo. Prior to his banking career, Spurny had spent several years with management consultancy McKinsey and Company, advising financial institutions on a number of CEE markets. The position of chief financial officer will be taken over by Bernd Mittermair, 43, currently head of group performance management at Erste Group Bank AG. He will succeed Helmuth Hintringer, 61, who will retire following more than four decades of working in banking in CEE. Sergiu Manea, 39, has been appointed to the newly created position of board member responsible for treasury, capital markets & group large corporates. The native Romanian will take over some of the responsibilities that are now with Wolfgang Schoiswohl’s business line.

There were also rumors at the end of last year that Guy Poupet would be replaced by Alexandre Maymat, regional director of the Cameroon branch of Societe Generale, said Mediafax, citing inside sources.

anda.sebesi@business-review.ro

Achievements of BT
•During Rekkers’s tenure the lender became the third biggest bank in Romania.  
•He managed to increase the value of the bank on the Stock Exchange from EUR 55 million in 2002 to EUR 1.7 billion in 2007.
•During his mandate, BT has always been a target for financial groups intending to enter on the local market.
•In the first nine months of 2011 BT posted an increase of 53 percent of its profits, to RON 106.9 million.