Domestic Banks Privatization Process

Practically announcing the initialization of the privatization process of certain domestic banks, the Finance Minister, Mr. Bozidar Djelic, said to the Saturday’s edition of the Novi Sad daily “Dnevnik”, that a decision on the take-over of ownership in 16 domestic banks will be signed within ten days.

– The Finance ministry, already competent for the carrying out of this proceeding, in cooperation with the National Bank of Yugoslavia and the Agency for the Banks rehabilitation, is working on the strategy of the sale of the State shares, more exactly the banks privatization, declared Mr. Djelic, adding that he postponed the signature of the said decision to avoid any kind of possible connection with the presidential elections campaign in Serbia. Mr. Djelic declared that this process should be accelerated, because many of the bank directors are expecting this decision, and because new depoliticized managing boards should be appointed.

These obligations were not included in the first phase of Paris and London Club of creditors and the old foreign currency savings deposit holders debt conversion process, but the banks will soon be asked by the Central Bank to transfer to the State additional shares portions. Namely, domestic banks will soon have to issue and transfer to the State property at least 530 million dollars in shares, the amount by which the Yugoslav debt towards the Paris Club of creditors was reduced, according to the terms of the contract signed with the USA and Switzerland, two days ago. In that way, the State who already became the major share holder in 11 and a minor share holder in other 5 domestic banks after the first phase of the debt Paris and London Club of creditors and old foreign currency savings deposits debt conversion, will have its shares portions additionally increased.

This recent operation included only debt principals and tardiness penalty taxes, previously coordinated with the countries we have bilateral agreements within the global arrangement with the Paris Club of creditors. Meanwhile, last September 20th, a bilateral agreement was concluded with Russia, and then with the USA and Switzerland. Based upon these agreements, will follow a second phase of conversion, transforming into State owned shares portion of obligations, which amount 530 million dollars only toward the USA and Switzerland. This sum should be increased by the amount of the written off debt towards Russia, but also Italy – another major creditor, with whom negotiations still are not finished.

The second conversion phase will take effect only upon the negotiations with all the creditors. The overall conversion of all obligations was not possible at once, because the amounts FRY has to pay to different countries on the basis of the debt principal and tardiness penalties were not completely coordinated. This is the reason why this sum was exempted from the first conversion phase, but it will be included in the second phase, once all details clearly defined. The Governor of the National Bank of Yugoslavia, Mr. Mladjan Dinkic, declared for “Dnevnik” that “this won’t bring significant changes to the situation” emphasizing that “this will practically mean an increase of the capital, the State will later trade with”. He also emphasized the fact that the principal of the debt as well as all the interests are already converted into State shares portions, as previously accorded with the members of the Paris Club of creditors, and that the second conversion phase will soon be initiated.

Anyway, the Republic of Serbia will become the major share holder in the following banks: Vojvodjanska Banka, Novosadska Banka, Panonska Banka and Kontinental Banka in Novi Sad, as well as Privredna banka in Pancevo, Jubanka and Srpska regionalna banka in Belgrade, Kredi banka in Kragujevac, Borska banka, Pirotska banka and Niska banka – to which Prokupacka and Vranjska banka were meanwhile added. According to the same principle, the State will become a minor owner, more exactly share holder, in Cacanska banka and another three banks in Belgrade: Kapital, Komercijalna and Agrobanka. According to the NBY Governor’s terms, the State will own in average 66.4 percent of the capital in 11 banks with major shares holding portions – going from at least 52 percent in Novosadska banka, to the maximum of 84 percent in Kontinental bank.