Банкеръ Weekly

Briefs

BANKERS' MONEY

BANKS SPEND BGN188MN ON SALARIES AND SOCIAL INSURANCE PAYMENTSWho gets what in the banking sector? This question probably attracts most curiosity - both that of the employees in the credit insitutions and of firms engaged in recruiting personnel. Banks' clients would also like to have that kind of information. However, it is among the top secrets in the finance and credits sector. Banks keep it so zealously that as of the end of 2002 they stopped sending to the Bulgarian National Bank (BNB) reports about the average monthly remuneration to their employees. In some credit institutions, such as HEBROSBANK, that type of confidentiality has become a mania, and the monthly salaries of its excutives are remitted to their accounts in other banks. All that is aimed to keep the staff's remuneration a secret in order to avoid internal intrigues. Due to that confidentiality regarding the money which senior bank managers get rumours spread and they soon become legends. Because of that secrecy, heaps of ridiculous information about the millions owned by one or another head of a credit institution appeared in the press over the last few months. Some executive directors, e.g. that of First Investment Bank Maya Georgieva, were shocked by the publications about their huge personal wealth of dozens of million dollars. The authors of such publications do not seem to realize the fact that if someone has so much money, he or she could live on the interest alone without having to work. The truth is that a bank manager cannot legally accumulate millions from his work. According to information of the BANKER weekly, most Bulgarians who manage credit institutions draw up to BGN15,000/month and almost 45% of that money goes for payment of taxes and social insurance. Many of the local bank managers do not live in 3-storey houses with swimming pools and spaceous gardens, do not possess villas abroad, and do not sail on yachts or drive posh cars. They usually live in well-appointed flats of 100-120 sq. m, have a villa in the countryside, and a medium-class car. The foreign bank managersare in a much more advantageous situation that their Bulgarian colleagues. Their average monthly remuneration usually exceeds EUR10,000. In most of the cases, the bulk of that money is not paid under a labour contract, but under a contract for consulting services, and frequently the money is remitted to bank deposits in offshore zones in order to avoid taxes. Moreover, the foreign managers of Bulgarian banks have manyadditional bonusesat the expense of the credit institutions they run. In fact, this is the situation anywhere in the developed countries. They have a personal driver and a secretary and they live in a luxurious rented flat or house with a yard, with a swimming pool sometimes. In the most frequent cases the Bulgarian banks undertake as well the entertainment allowances of their foreign managers. According to Bulgarian bankers, the monthly maintenance of a foreign colleague of theirs could reach BGN30,000. This is not a huge sum according to West European standards, but this is a real fortune for Bulgaria. A foreigner can save on it sufficiently in order to ensure a pretty high level in the social hierarchy after going back to his native country. Many foreign bank managers admit they have not been delighted by their appointment to Bulgarian banks, but after a while they begin to like their stay here and make everything possible to lengthen it. No wonder that one of the biggest items in the expenditure side of the balance sheet of Bulgarian credit institions is the money for maintenance of personnelIn the first nine months of 2003 the banks spent BGN188MN on salaries and social insurance payments. This amount is 20% up from a year ago when BGN156MN was spent. It is difficult to say how much of the BGN188MN entered the managers' pockets. The huge difference between Bulgaria and the West European countries and the USA is that the remuneration of senior managers and their assets are not a secret there. Bank heads in these countries consider it a matter of prestige if they succeed to negotiate a higher salary, and when they achieve that, they do not mind if the society learns about that. Institutions that higher them, on their part, feel obliged to inform their investors about the money they pay to the managers and about the commitments they have undertaken in exchange to that huge remuneration. But here, in Bulgaria, people think differently... According to the estimates of some financiers, about BGN16MN has been paid to the managers of all Bulgarian banks from January to September 2003. If we accept this information as trustworthy, it turns out that local banks' employees got a total of BGN172MN (salaries and social insurance) for the first three quarters of the year. Having in mind that 21,237 people were employed in the sector in end-September, it can be calculated that the average monthly remuneration to one employee was BGN900This amount is almost BGN75 up from September 2002. The increase is entirely justified, considering that the bank sector's profit for the first nine months of 2003 was BGN294MN, up 19% from a year ago. The new trend in Bulgaria in 2003 is that the biggest banks pay average salaries of about BGN1,000 (including social insurance contributions). The average amount of remuneration in BULBANK for example, where 2,060 are employed, is BGN1,178, up almost 38% as compared to 2002. The credit institution applies a special system of incentives for its employees, who receive additional bonuses on the basis of the evaluation of fulfillment of their tasks, set to them in the end of the previous year.In the last year (from September 2002 till the end of the same month of 2003) a considerable increase was registered of the average remuneration in UBB- from BGN650 to BGN934. However, the growth of salaries in the credit institution is connected with an increase of its personnel. Its employees amounted to 2,156 in 2003, up from 1,994 a year earlier.High average monthly salaries and social insurance contributions were also paid tothe employees of Raiffeisenbank (Bulgaria)- BGN1,309, of First Investment Bank and of SG EXPRESSBANK - BGN1,249, and to Bulgarian Post Bank - BGN1,066Salaries have been raised in DSK Bank, tooat that before October 2003 when it was sold to Hungary's OTP. The average monthly remuneration plus the paid social insurance contributions to its staff in the first nine months of the year is BGN806, up from BGN572 a year earlier. This became possible not only due the bank's fair financial performance for the first nine months of 2003 (its profit is BGN36.4MN), but also due to the steep decrease of the credit institution's personnel. In end-September 2003 its personnel totalled 3,940, down from 5,199 in September 2002. But that reduction of staff was not a result of large-scale lay-offs, but to the restructuring of the bank's activities, implemented by its managers before it was sold out. In the beginning of 2003 the encashing operations and its rest houses were separated in two self-contained companies, to which some of the bank's employees were redirected. The champion regarding the size of the average salaryof employees is the Sofia-based branch of Citibank. Its Executive Director Plamen Ilchev runs a small, but efficient team. The 44 employees of the branch get average monthly remuneration of BGN 3,734 (in salaries and social insurance contributions). High remuneration and social insurance contributions are paid in BNP-Paribas (Bulgaria) as well - BGN2,717/month on average within the first three quarters of 2003. Within the same period the employees of Bulgarian-American Credit Bank got BGN2,617/month on average, and those of the Sofia-based branch of Ziraat Bankasa received BGN2,254.Quite the oppositein that respect are International Bank for Trade and Development (IBTD) and First East International Bank (FEIB), whose expenses for salaries and pension insurance are among the lowest in the finance and credit sector. According to the data for the nine months of 2003, the employees of IBTD received BGN551/month as salaries and social insurance contributions, and those of FEIB go BGN551/month. It's hard to believe that very good experts would remain in these banks, having in mind these levels of remuneration. Nevertheless, both IBTD and FEIB are in a fair financial health and hold stable positions on the market. But this is not likely to continue with poorly-paid employees. This leads to the thought that the two banks' managers have probably found specific ways to financially motivate their personnel. With the development of bank services and the growth of volumes of funds, which Bulgarian credit institutions service, they will need better qualified staff. The competition between the banks for the attraction ofwell-dressed and loyal personnelwill be growing each coming year and the size of their remuneration will be playing an increasingly important part in the recruiting of qualified employees. For that reason it could be expected that in the two or three years to come the average amount of monthly salaries in the financial sector will continue to go up and it will not be long before a monthly remuneration of BGN1,000 would be considered normal for a bank employee.

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