Банкеръ Weekly



The first general meeting of Borika AD, the private company for card settlements, was held at the Rila hotel in Sofia on June 14, 2005. BNB's Governor Ivan Iskrov, the new Vice Governor Dimiter Kostov, and his predecessor Bozhidar Kabakchiev, together with representatives of 24 banks and branches of foreign credit institutions, approved the BoD members of the national card operator and changed its statutes. As could be expected no representatives of United Bulgarian Bank (UBB) were present at the meeting. Still a week ago UBB's execs announced they did not agree with the BNB-proposed structure of Borika's BoD, as it did not reflect correctly the positions of banks on the card market. The executive directors of UBB, which is the leader on the local debit and credit cards market, and was the first one that established a card centre, demanded to have a representative in that BoD. Their demand, however, met a silent refusal on the part of the other banks. At a meeting of the Association of Commercial Banks (ACB) on June 10 they consolidated around BNB's proposal which holds 36.34% of Borika's capital. And it was to appoint a 7-member BoD, including a representative of the central bank, three from the big credit institutions (one of whom should represent the banks which have their own card centres), and two representatives of small banks. The seventh member was the Executive Director of Borika Alexander Matrozov, nominated by the BNB as the person to continue the operational management of the card operator. UBB's executive directors insisted that their bank should represent the interests of institutions with their own card centres and opposed to Matrozov's future management of Borika. After it became clear they could not find followers to support their demands, UBB's execs disaffiliated from the structuring of the new BoD and from the decision-making for amendments to Borika's statutes.According to some financiers, most banks have decided not to support UBB fearing that if it gets the control over the management of the national card operator, instead of directing most of the investments to the development of new products and services, its heads would invest them in the expansion of the informational infrastructure, maintaining the link between Borika and the card centres of banks which have such and process the information which goes to them. This concerns a huge volume of data about transfers and drawing of money that will be increasing quicker and quicker each year as all western analysts forecast a steep rise of card operations in Bulgaria. And the bigger volume of data means constant modernization of computes, maintaining the connection between the banks' card centres and Borika.However, UBB's managers claim that their colleagues' apprehensions are groundless and are due to ignorance about the specifics of hardware and software, maintaining the card payments. But the silent antagonism between the credit institutions with their own card centres and the banks which do not have such, is a fact. As the latter are more in number (only three banks have their own card centres at present), UBB's demand was ignored.The general meeting of Borika approved ACB's proposal to elect a 7-member BoD. It includes BNB's Vice Governor Dimiter Kostov, Alexander Matrozov who remains Executive Director of the company, the Chairperson of DSK Bank's Management Board Violina Marinova, the Chairman of BULBANK's management Board Levon Hampartsoumyan, the Executive Director of SG EXPRESSBANK Krassimir Zhilov, his colleague from Central Cooperative Bank Viktor Mechkarski, and the Executive Director of Inevstbank Kiril Grigorov. There is only one change from the initially proposed by the BNB members of Вorika's BoD. At the ACB meeting on June 10 the banks agreed that Maria Ilieva, Executive Director of HVB Bank Biochim, would be in the BoD. The condition was that she will be replaced by Krassimir Zhilov if BULBANK's owner - the Italian UniCredito - closes a deal for its merger with Germany's HVB and for acquiring its subsidiary Bank Austria. The latter is the owner of HVB Bank Biochim and HEBROSBANK. The news that such a deal would follow was broken on Sunday (June 12) by the CEOs of UniCredito Alessandro Profumo and of Germany's HVB Dieter Rample. Therefore, the reserve option was chosen on June 14 and Mr. Zhilov was appointed to the company's BoD. The general meeting of Borika voted that the BoD would have a one-year mandate and assigned it with the task of working up a draft to amend and supplement the statutes of the national card operator. The changes in the statutes should regulate the proportional principle of commercial banks' shareholder participation and the algorithm for its calculation, as well as the principles and rules for representation of shareholders in the company's BoD. According to the agreements between credit institutions, the share of each bank in Borika's capital is determined on the basis of the number of effected card payments and of the debit and credit cards, issued by it. As these indicators constantly change, the shareholder stakes of individual banks should be corrected at certain intervals of time. A similar principle is also used when distributing the capital of Bankservice - a company maintaining interbank settlements in the country. Shareholder participation in it is updated every three years. The term for Borika will be shorter - one or two years, as the card operator develops much more dynamically than Bankservice.The company's statutes will include a clause specifying the principle for transference of shares from one bank to another, whose card operations have considerably increased their volumes. That will be probably done against payment of a certain price. All these questions are to be specified by end-September. They are expected to be voted at Borika's next general meeting, scheduled for November 2005.Borika's BoD has serious tasks to solve. We'll recall that the company's statutes stipulate that a single shareholder is not allowed to hold directly or indirectly more that 10% of its capital (except BNB which owns 36.34%). This immediately puts forward the question about the present share participation of BULBANK, HVB Bank Biochim and HEBROSBANK. After the merger between UniCredito and Germany's HVB, the new European megabank will control all three Bulgarian credit institutions, and they own 347 pieces of Borika's shares, or 13.88% of its capital. BULBANK holds 133 pieces of securities, or 5.32% of the capital, HVB Bank Biochim has 118 pieces of stocks, or 4.72% of the capital, and HEBROSBANK owns 96 shares, accounting for 3.84% of Borika's capital. It turns out that after the deal between UniCredito and HVB becomes a fact (expected to happen by the end of November 2005), the three Bulgarian credit institutions will have to sell to the other shareholders of Borika a package of 100 stocks in order to reduce their total share in its capital to 10%.It's worthwhile recalling that each of the 25 banks, which currently hold 63.76% of the national card operator, purchased from the BNB company shares at BGN3,906/apiece for a par value of BGN1,000. It's highly improbable that anyone would agree to sell some of his securities at a lower price. All questions should get their answers in the proposals for amendments to Borika's statutes, to be voted at its next general meeting. Until then, a way to smooth over the relations with UBB will be probably found as well.

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