Why was the Bankers Association created and what is its main purpose?
The Romanian Bankers Association was created in 1991. It is a professional association and not a legal entity. The purpose of this association is to promote the aim of its members in order to strengthen and create a healthy environment for the banking industry in Romania. Maybe this purpose is not the same as the purposes of other similar associations, but you must know that the association was created immediately after the political changes in 1989 in a moment when the Romanian banking industry started to develop in a different way than before. There were private banks created, foreign banks appeared in the market and a new competition and banking law was passed so that everything was new in the banking activity in the early 90's. Under these circumstances the banks operating in Romania considered that we had to create an association which would promote the spirit of its members before the authorities. At that time Romania did not have a banking law. The Central Bank was just a "little boy" created with new functions. Before 1989 the central bank of Romania was also a commercial bank but it was split in 1990 into The Romanian Commercial Bank and The National Bank of Romania that took the part of the Central Bank.
Since the legislation was very volatile and nobody knew exactly where to go, the bankers decided to make an association trying to put together all the valuable ideas as an association, and not as individuals. One of the main tasks of this association was to help to promote the new legislation regarding the banking activity, the banking law. In its 9-10 years of activity the Romanian Bankers Association participated in the promotion of two banking laws, the one in 1992 and the second one in 1998. As time passed by, the Central Bank and the Romanian banking community got to the conclusion that the banking law we had promoted in 1992 could not correctly cover the Romanian environment. We participated very much in the promotion of the bankruptcy rule, which was issued in 1998. I have given you only two examples although there are a lot more.
As an association we are collecting every day the ideas coming from the commercial banks, and we try to give sense to all these proposals or complaints of the Romanian banking community. With these, under the Romanian Bankers Association's signature, we go to authorities such as the Central Bank, the Ministry of Finance or the Romanian Development Agency, and we try to promote ideas and new rules, or to change the already existing ones. This is from the legal point of view.
The Romanian Bankers Association is organized into several committees: the IT Committee, Legal Issues Committee, Committee of Money Laundering, Committee for Security in the Bank, etc. All these committees are composed of specialists who are bank members. They are the first counselors of the board of the Romanian Bankers Association. In 1997 the Central Bank decided to introduce a new chart of accounts. The IT Committee, which is in fact a kind of operational committee taking care in general of all the operations in a bank, met once or twice every month and came with proposals. They were not powerful enough to go straight to the Central Bank but through the voice of the Board of Administration of the Romanian Bankers Association we have promoted a lot of changes and amendments in the new way of account in methodology. Even though sometimes we have succeeded and some times not, the Central Bank has admitted the very valuable contributions of the Romanian Bankers Association.
It was the same regarding the Y2K bug. Through this committee, the Romanian Bankers Association was one of the engines in Romania to wake up people regarding the problems of the year 2000. I wrote myself a letter to the Central Bank telling them that they had to decide about the measures that needed to be taken regarding the year 2000 problem. Finally, pressed by us they have pushed the Government to decide about creating in Romania a kind of taskforce and contingency plans for both banking and non-banking activities.
We are proud to say that the Romanian Bankers Association was the one association pushing things ahead in this delicate matter. Finally nothing happened in the banking sector because everyone took proper measures. Let me give you an example. From this IT Committee came up an idea: in the loan agreement that the banks would sign with their clients during 1999 and 2000 there was to be a clause saying that if the client would face problems due to the year 2000 bug, this would not be an excuse for them not to pay. Likewise, if they would say they were sorry they could not pay because one of their beneficiaries had problems that would not be acceptable. This was very important, and when the banks started to draft these clauses in their loan agreements the clients woke up a bit and started thinking also about this matter.
You might consider the examples I have given you are not of a very big value, but to tell you the truth, we have created the proper environment for developing a number of things in the Romanian banking industry and in other activities. Today, together with the Central Bank we are very worried about the implementation of the international accounting standards in the accounting of banks. This is a very serious matter, everybody considers that IAS has to be implemented as soon as possible and they are willing to do it. This is not an easy task. We need the approval of the Ministry of Finance and for this we have to prove them that this is not going to touch very much the state budget. In an environment as ours, the conversion of financial statements from local rules to IAS rules, usually the profits become losses or big profits become small profits, and this means the state budget is not going to collect the taxes they had in mind. For this we had to make a lot of lobbying to the Minister of Finance.
The board of the Romanian Bankers Association is composed of five persons who closely cooperate with those committees that are idea makers. Putting together forty thinking heads from different banks involved in leading you are bound to receive a lot of ideas. Presently the five members are only four: myself as Vice President, Mr. Bogdan Baltazar from Société Générale, Mrs. Elena Petculescu from Banc Post -and Mr. Radu Emil from MIND Bank.
How does a bank become a member of your organization?
Today we are forty members. Commercial
Banks, branches of foreign banks and any other banks
that are authorized by the Central Bank are allowed
to become members. In order to become a member there
are some rules to fulfill. They have to prove that
they are licenses. They have to submit an application
to the General Assembly who gives them six months
of observation period. This means that during these
six months the other members are looking at how
the candidate is performing. After six months we
meet again in the General Assembly and this time
the members can spread their opinion if the candidate
can or cannot to become a member. They cannot become
members if they are not honest enough and do not
respect the rules of the game, even if they have
a license. Until now everyone who has asked to become
a member has been finally welcome. |
We have dismissed some members like Credit Banc, Albina or BankCoop who have been bankrupt or which were not in a clear legal statute and did not pay the annual fees. At the beginning we were 46 and now we are only 40.
How is the process of selection of the members of the board?
The members of the board are not elected as representatives of a bank but as personalities. They do not represent a bank here. Even though you cannot separate totally from your activity when you are elected as a member of the board, the law of the Romanian Bankers Association says you are representing only yourself. Otherwise we would have to elect BCR because is the biggest bank, or Société Générale because is Société Générale. This is why, for example, Banca Bucuresti which is a small bank or MIND Banc are represented in the board and other big names like ING, ABN or Creditanstalt are not.
It is true that last time when we elected the new board in March 1999, the percentage of people working in the board and in foreign banks was very small - actually only myself was working in a bank having foreign capital. Banca Bucuresti has only foreign capital from Alpha Group from Greece and the EBRD. The other persons in the board were from state owned banks. Due to the privatization process, gradually this board in which only myself was representing foreign investors, has now three foreign representatives. In fact the state banks are not at all represented in the board.
What is the biggest success of the Romanian Bankers Association?
In Romania we face a very big problem as banks having the capital expressed in dollars or in lei. Most of the banks here, either state banks, Romanian private banks or foreign banks were trying to consolidate their capital. This was not a very easy task because the Central Bank was pushing us all the time to convert the dollars into lei and to become a lei bank. This was a problem both for state owned banks and for private banks. We have succeeded to promote some ordinances which were finally approved by the Parliament stipulating that banks having the capital expressed in dollars can use the reserves from FX differences to increase the capital in lei.
We did this for state banks and private banks, and now we have promoted to the Central Bank the new proposal for branches of foreign banks coming into Romania which in the mean time were forced to put down capital. This time we came in the name of the members of the branches of the foreign banks like ING, UGBI and so on.
I consider this a very big success of the Romanian Bankers Association and I will tell you why. One of the problems the banking system is having in a transition economy in an environment like Romania has is the de-capitalization of the banking system. You can imagine a foreign investor coming here in Romania with US$ 10 million in 1994 meaning less than ten billion lei. If you divide now ten billion lei by 19,000 you will see how many dollars you have today and you will see what has become the capital you put in then. With this we have stopped some foreign investors in the banking sector from taking their money back, and more than that, we have given them the trust that they can invest more in the banking sector in Romania. Up to this year, using the exchange rate differences to increase capital was tax free. Now the Ministry of Finance has put 10% tax on it, but despite this the banks remained happy that they can use this money for their consolidation.
Now we are working very close with Central Bank to create an electronic payment system in Romania and to operate a clearing house.
There are lots of problems in the Romanian banking system. I have not mentioned the things for which the Romanian Bankers Associations has fought for but where we did not succeed to get the answers we wanted. For example we are very unhappy about the minimum reserves the Central Bank is charging us with. For the foreign currency deposits we are paying 20% minimum reserve and for lei deposits we are paying 30%.
Before 1997 Romania was not organized to face bankruptcies and other problems the banking system can face. For instance the depository guarantee fund was just created. The bankruptcy does not take this into consideration and they came earlier than expected. We have had banks who went bankrupt and the fund was not large enough to cover this problem. In fact the fund claimed to insure that from the money you put in a bank you could receive back part of it from the fund. After the bankruptcy of Bancoop and Albina we discovered that the fund did not have enough money and the decision of the fund was that the banks have to pay a kind of supplementary subscription that is double than the normal subscription. So, for instance, a bank that performs well has to pay three times the subscription - the normal and the double one. Nobody is happy with this and the Romanian Bankers Association was mandated by the General Assembly to discuss with the authorities to come up with a solution. Now we are in deep discussions with the authorities and it seems we are going to find a solution for the banks not to pay a large contribution. As you can see, banks have to block a lot of funds taken from depositors and finally only a part remains at their disposal to finance the Romanian economy. This way we become some kind of money collector from the clients and part of it we put in the fund, part in the minimum reserve, part in fixed assets. So where are the available funds to do the real banking activity? This is a problem we are facing today and the Romanian Bankers Association is trying to solve it in the name of the entire community.
The banking activity in Romania is one or two steps ahead of other activities. We have developed much more than other fields but we have also had the problems that I have mentioned. Anyway there are successful banks in Romania, there are banks that disappeared from the landscape and there are some banks that are surviving but this is life and we face all its aspects. |
ROMANIAN BANKERS ASSOCIATION