About the "second coming" and control over the banking system of Moldova
InfoMarket agency comments
Having waited a wave of enthusiastic comments and statements regarding the sale of 41.09% of the country's largest shares of Moldova Agroindbank (MAIB) to an international consortium, it can be discussed calmly now.
During the preparation of this transaction and after signing the contract, for some reason, almost no one recall that this is the "second coming" of two old shareholders: the European Bank for Reconstruction and Development ( EBRD ) and the Western NIS Enterprise Fund (WNISEF) which today managed by Horizon Capital, they acquired, respectively, 9.8% and 9.9% of the shares of MAIB in 2001 and sold the shares in 2006.
During above mentioned period (especially in 2003-2004), mass media, and not only the Moldovan one, revealed the "indecent" details of the conflict that broke out between the bank’s shareholders. The reasons were voiced by both parties, and each party had its own truth: the management of the bank headed by Natalia Vrabie and some of the shareholders declared that the bank had been under raider attacks but foreign shareholders insisted on receiving the dividends and were indignant at Natalia Vrabie’s "golden parachute" in the amount of $10 million, she was supposed to receive in case of her early dismissal from the duty of chairman of the bank.
But, the scandal was settled down at some point; the parties realized that the dirty linen from the hut damaged the reputation of the bank badly, therefore, devalued its shares with all the consequences. Then the conflicting shareholders worked out some kind of agreement which allowed the EBRD and the WNISEF sold their shares to a group of investors from Slovenia and the Netherlands in 2006. By the way, there were no foreign companies or individuals involved on the eve of the transaction for the sale of 41.09% of the shares of MAIB shareholders in September 2018 (the largest shareholders possessed more than 1% of the shares).
The current deal, apparently, still echoes to the Moldovan state. Despite the fact that the National Bank of Moldova, together with the government and the parliament of the country, analyzed and documented every action and every step thoroughly, but the international lawyers of the former shareholders (this also appeared in the mass media) do not refuse to sue at the international courts for the protection of the shareholders’ rights because 41.09% of MAIB’s shares were confiscated.
If someone has to take responsibility for the illegal gain of the shares, those are not investors. The investors have bought shares from the government of Moldova so they are just honest buyers. This means, if anyone suffers because of legal proceedings (which, of course, to be continued), it is the government, first of all, and the state budget afterwards. But, we will not look ahead in the long term.
Three investors: Horizon Capital, the EBRD and Lithuanian company Invalda INLV specially created investment company HEIM Partners Ltd (the name, apparently, is written after the first letters of the HEI and letter M, meaning, the investors, the names of the country and the bank). They acquired 41.09% stake of shares in MAIB and in September, the Competition Council considered the request of HEIM Partners to acquire the rights to use 7.28% of the shares, in fact, the number of shareholders agreed to give their votes (not shares) to the new owners.
Thus, the group of shareholders, with the permission of the NBM, most likely they will vote with 48.37% stake of shares in the bank. In the case of Moldova-Agroindbank, that means de facto full control: there are more than 3 thousand shareholders in the bank and they have never all been present at the general meeting at the same time.
The shares of HEIM Parnters Ltd, the EBRD and Invalda INLV are 37.5%, and Horizon Capital has 25%. Based on this calculation, the EBRD will own approximately 15% of MAIB shares. At the same time, it was announced that the leading role as a shareholder in this bank will be assigned to Horizon Capital, as the one of the most experienced investors in Moldova.
In general, it is worth sharing the goals and objectives of investors in the consortium itself. Invalda INLV is rather a classic investment fund that invests in order to generate incomes for its investors and shareholders. Horizon Capital is a venture fund, its goal is developing acquired assets for the purpose of resale to strategic investors to make a profit out of it. As for the EBRD, its charter is a bit more complicated.
The agreement to create the EBRD, signed in 1990, entered into force in 1991. "The bank’s goal is to contribute to economic progress and reconstruction to promote a transition to an open market-oriented economy, as well as the development of private and entrepreneurial initiatives in the countries of Central and Eastern Europe that are committed to the principles of multi-parties democracy, pluralism and market economy putting into practice. "
The EBRD is the joint stock company, its shares can be bought and sold under certain conditions. The resources of the bank, in addition to the authorized capital of 10 million ECU (the same amount in euros), are also borrowed resources, funds received for the repayment of loans, etc. That is, the principles of a classic commercial bank, shareholders’ money plus income from investment activities. There's Charter and a separate article about the distribution of income. In particular, it says: "The bank is guided by honest banking principles in all its operations." At the same time, it is impossible to say that the Board of Directors somehow limited by the types or amounts of the commissions:
"1. In addition to interest, the Bank charges a fee for the loans granted or for the loans as part of its normal operations. Terms of payments of the commissions are determined by the Board of Directors.
2. If granting a loan guarantee as part of its normal operations or guaranteed placement of securities, the Bank charges fees payable at the rates and dates determined by the Board of Directors in order to provide appropriate compensation for its risks.
3. The Board of Directors may establish any other fees that the Bank charges on its ordinary operations, as well as any commissions, or other payments on its special operations."
The bank comes to a country with its projects only by invitation and the application must be in written form.
In addition, considering the international status of the bank, all its members, who adopted the charter, accepted articles that refer to the protection of assets and archives from confiscation (requisition, expropriation, etc.), and “all managers, directors, deputies, official persons and employees of the Bank, as well as experts who carry out the instructions of the Bank, are protected from legal proceedings regarding actions committed by them in the performance of their official duties, ” unless the bank deprives them of this protection. The Charter also contains a number of privileges granted to bank employees, equating them with government officials.
"As part of its official activities, the Bank, its assets, properties and incomes are exempt from direct taxes." But, it is not exempt from paying utilities.
In other words, if you read the charter carefully, it seems that the European Bank for Reconstruction and Development is a commercial organization created by a number of countries, as well as by the European Investment Bank and the European Economic Community, which has political influence and is protected by diplomatic immunity. But, there is nothing bad in this: the EBRD finances many important projects in risky developing countries; its presence attracts other international investors to those countries and it is well-known fact that risks cost additional finances.
In addition to this consortium on the shares of MAIB, there were no other investors. Yes, the amount of the transaction is three times lower than the value of assets per share, there would be others willing the price could be higher. Foreign investors could not get dividends from the management in the first half of the 2000s, as well as other shareholders of MAIB. Now, everything is in their hands: HEIM Partners Ltd, can already count and vote for dividends. Moreover, the bank’s own funds amount to 3.2 billion lei (160 million euros) as of August 31, 2018. That is, having bought 41.09% of shares for 451.53 million lei, HEIM Partners Ltd actually purchased assets for 1.3 billion lei which is more 2.9 times. It will be interesting to see whether the shareholders will decide at the annual general meeting to pay something in the form of dividends in the spring of 2019.
Banca Transilvania (it’s controlled by the EBRD) acquired 39.2% stake of shares in Victoriabank (VB), the EBRD directly owns 27.56% of shares in the same bank (VB), so the European Bank for Reconstruction and Development gained full control over Victoriabank which is 66,76%. It was announced that the EBRD is ready to buy shares from all other shareholders who wish to sell them in accordance with Moldovan legislation. The EBRD, together with its partners, has gained control over MAIB now.
It should be noted that EBRD also owns 8.84% stake of shares in Mobiasbanca - Grupe Societte Generale, and the Western NIS Enterprise Fund has 13.03% stake of shares in Fincombank. In addition, the EBRD has non-voting shares in Procredit AG, which owned by German company, that is 100% stake of shares of Moldovan Procredit Bank.
The total assets of MAIB and VB make up 46.5% of the total assets of the Moldovan banking system. If we add to this the assets of the EBRD in Mobiasbanca and WNISEF in Fincombank, three foreign investors (including the new Invalda INLV) own 48.2% the stake shares of the assets of Moldovan banks. The share of Procredit Bank in the total assets of the banking system is 4.2%.
We also need to keep in mind Moldindconbank with 19.01% stake of assets in the banking system, this bank put up for sale 63.89% stake of shares. The National Bank and the government also intend to sell these shares to a strategic investor (hardly local). Moreover, among many enthusiastic statements after the deal with MAIB, it was clearly stated: the procedure was tested and it can be applied to Moldindconbank shares as well...
PS: At the stage of creating the Moldovan banking system under the leadership of Leonid Talmaci, he was the first president of the NBM, everything was done so that Moldovan banks could get on their feet before foreign banking capital reaches Moldova. Its arrival was not that someone resisted, but at the legislative level the equal conditions were created for all market participants, which favored Moldovan banks more. That is also the reason, it is impossible to open branches of foreign commercial banks in Moldova, each bank must be registered separately, according to the legislation; thus, the Moldovan banking system was made less attractive to foreign banks.
Former President Vladimir Voronin had the same opinion, there were rumors, he was not very happy when Mobiasbanca was bought by a group of Societte Generale.
Leonid Petrovich and Vladimir Nikolayevich’s "nightmares" became the reality; the Moldovan banking system is being controlled from abroad now. On the other hand, we all know too well the results of so-called "self-control". The country has been suffering within 27 years from political instability, because of the desires and the actions of some politicians to reach into the pockets of the local financial institutions, but the external control of the banking system put an end to this.
We could not understand and agree with each other regarding development of the banking system, thus, we will live based on the principles from abroad. We also need to take into consideration that it is mentioned in the Charter of the EBRD, for example: "The President, Vice-President (s), officials and employees of the Bank serve only the Bank and no one else in the performance of their duties." We have what we have. // 10.10.2018 - InfoMarket.