A Greek bank bought the Bulgarian subsidiary of another Greek bank on Wednesday (7 November). The deal seems totally at odds with the terms of Greece’s bailout deal, but not only that.
Greece received three successive bailout packages, totalling €289 billion, but they came with the price of drastic austerity measures. The country took commitments, including the sale of the foreign units of its banks which received state aid by being massively recapitalised.
Consequently, the Greek Piraeus Bank is completing the sale of its foreign units. Unlike its mothership in Greece, Piraeus Bulgaria enjoys a good reputation, also thanks to recapitalisation rules which have been tougher in Bulgaria even before they were strengthened at the EU level.
According to a press release published on Wednesday (7 November), the Greek Eurobank announced it has concluded an agreement with Piraeus Bank, for the acquisition of Piraeus Bank Bulgaria by Postbank, the Eurobank subsidiary in Bulgaria, for the price of €75 million.
According to the website of the Bulgarian weekly Capital, the other competitors were the Bulgarian American Credit Bank BACB, run by Tsvetelina Borislavova, a former partner of Prime Minister Boyko Borissov, Investbank run by businesswoman Petya Slavova, and an unnamed foreign investment fund, active in Central and Eastern Europe.
The Postbank press release said the transaction strengthens its position in the Bulgarian banking sector, where it will now have a market share higher than 10%, making the Greek bank the third largest in the neighbouring country.
Re-shuffling assets instead of selling
According to information obtained by EURACTIV, there has been little chance for the other bidders to be successful as the transaction had reportedly been decided by “big Greek boys” one year ago.
But the acquisition also points to a scheme whereby Greek banks do not sell their foreign units but simply re-shuffle assets, probably with the assistance of the Greek state. This obviously flies in the face of the EU’s whole idea of de-risking, as part of the measures to avert new banking and financial crises.
According to rumours in Sofia which EURACTIV couldn’t immediately verify, other bidders had offered a higher price for Piraeus Bulgaria.
Loophole in EU regulations
Another issue is that of possible loopholes in the EU regulations, which allow foreign-owned banks in weak economies to keep €2.2 billion of Bulgarian funds in the parent banks in other countries.
According to information from open sources, OTP Hungary, the owner of DSK bank Bulgaria, UniCredit Italy, owner of UniCredit Bulbank, and Piraeus Greece, owner of Eurobank in Bulgaria, keep €2.2 of the Bulgarian savers’ money in the parent banks, on short-term nostra account deposits, and are rolling those deposits on a weekly basis to keep them permanently.
Under EU legislation, all banks have a restriction to lend only up to 25% of their capital, and 10% if they lend to related entities. An expert commented that in this strange scheme, however, the lending for the parent banks in Budapest and Rome is as much as 100%, and in the case of Piraeus, 130-140%.
Only Greek, Hungarian and Italian “parent” banks use this scheme, unlike the other foreign bankers in Bulgaria. The reason is that junk-rated countries find it difficult to raise money otherwise.
“Nobody gives money to Greece, but [Greek banks in Bulgaria] give Greece €600 million. They [the Greeks] cannot raise money elsewhere but it’s so easy for them to syphon money in Bulgaria. And if someone buys a [Bulgarian subsidiary] bank for €75 million and the next day takes out of the bank €75 million, it means they got it for nothing,” an international financial expert and investor told this website.
Stupid or corrupt?
Asked if the Bulgarian National Bank BNB, who acts as a regulator, was corrupt or just unaware, the expert countered:
“What do you think?”. He added, however, that BNB had a “very limited toolbox”.
It is strange however how BNB lets money of the Bulgarian savers “work” in other countries, and not at home.
Other sources point out the collateral damage for Bulgaria resulting from the EU measures to fix Greece.
“Ten percent of the Bulgarian banking sector is for sale, under an authority which cares for Greece, not for Bulgaria”, a banking expert said, referring to the EU Commission. He pointed at the risks for Bulgaria also in the context of the country’s bid to join the eurozone.
EURACTIV asked the Commission to comment on the specific points of the re-shuffling of banking assets and the alleged use of legislative loopholes.
The EU executive sent a written reply saying it was following the implementation of the restructuring plans of the Greek banks through regular contact with the appointed monitoring trustee.
“The Commission does not comment on specific transactions of the Greek banks. We trust that the supervisors involved in the approval process of the deal would have considered all the relevant elements before approving the transaction”, the answer reads.