SETimes.comAgrobanka scandal investigation expands
20/08/2012
Some analysts believe the Agrobanka scandal may become Serbia's equivalent of Croatia's Sanader affair.
By Georgi Mitev Shantek for Southeast European Times in Belgrade -- 20/08/12
An investigation of Belgrade's Agrobanka may reach the country's top political and financial echelons, but analysts said the extent of the financial damage is yet to be determined, especially if the bank's foreign investors win in international arbitration.
The authorities closed down Agrobanka and arrested its board of directors, following a television interview by the bank's board director, Dusan Antonic, in which he admitted receiving a bonus of 600,000 euros despite knowingly providing loans that could not be repaid.
Agrobanka amassed losses nearing 300 million euros in 2011, but analysts said the affair is doubly damaging to Serbia.
"Politically, the rating of those involved will fall … but the new government will persist in persecuting political opponents. Economically, it proves Serbia has huge problems and does not comply with the basic principles of market economy and the rule of law," Dejan Vuk Stankovic, professor at Belgrade's Political Faculty, told SETimes.
The first arrests, however, began at the end of May when the National Bank of Serbia withdrew Agrobanka's operating license after five months of receivership when its reserves did not adequately cover its loan portfolio, despite being solvent, the Belgrade daily Politika reported.
The National Bank of Serbia used corporate deposits, together with savings deposits, to create another bank under the name Nova Agrobanka; it issued state bonds to increase the new bank's capital to 90 million euros, according to media reports.
The old bank was footed with bad debts and receivables that analysts said will never be collected.
"The government's move with the new bank is an unprecedented state robbery. This is the biggest case of bank embezzlement in the recent history of financial operations that can hardly be covered up with such spectacular arrests of individuals," Ales Skoberne, representative of EU investors, said.
The EU minority shareholders invested 130 million euros in Agrobanka.
Skoberne said the minority shareholders -- investment funds from Austria, Sweden and Slovenia -- initiated two independent audits through PriceWaterhouseCoopers but the state representatives never showed up.
The state owned 20 percent of Agrobanka's capital in swap shares from an old debt from Beogradska Banka group.
Two state representatives sit on the Agrobanka board, as well as employees in the state-owned companies Transnafta, Srbijasume and PKB Imesa, two deans of state faculties and a member of Serbia's Anticorruption Council.
"The National Bank and the government will have a huge problem if minority shareholders win in international arbitration, a damage measured in hundreds of millions of euros," Branko Pavlovic, former director of Serbia's privatization agency, told SETimes.
"Similarly, six other banks under government control amassed losses in the amount of 500 million euros. The situation requires a thorough, impartial, highly professional audit ... or the whole system will collapse," Pavlovic said.
Analysts said the public is particularly riled about the extent of the former government's members, partners' and associates' involvement in Agrobanka.
Former Prime Minister Mirko Cvetkovic was on the bank's board of directors while numerous businessmen close to the Democratic Party obtained loans at the height of the world financial crisis.
"The only answer [given then] was that regardless of the business results, obtained with consent or on orders from state and governing party circles, small businessmen and businessmen without political backing could never hope to get loan approval," Miroslav Prokovijevic, representative of the Institute of European Studies, told SETimes.
Stankovic argued the fallout of the state banks' cases is yet to be seen, but it will clarify the issue of political influence on the economy.
"There will always be political influence, but the banks are lending more cautiously," Stankovic said.