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$222m boost for privatisation of Romania's largest bank

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Related links Romania homepage Lending to banks homepage Banca Comerciala Romana Pre-Privatisation [Project Summary Document] $222m boost for privatisation of Romania's largest bank [Press Release] Bank equity projects [EBRD - Sectors: Financial institutions]

BCR's Bucharest headquarters

Improving client services is a priority

The Romanian government's long-standing plan is simple: find a reputable strategic investor to facilitate privatisation of the country's largest state-owned bank. So far, though, things haven't worked out quite as planned. In 2002, when Romania was ready to take this big step, the global economy deteriorated and Western European investors had things on their minds other than buying shares in Banca Comerciala Romana (BCR), even though the bank was doing quite well. Still, the Romanian government wanted to keep momentum in the privatisation process, a critical step in the country's transition from the former state-managed economy to a market economy. Privatisation is crucial to Romania's hopes for joining the European Union in 2007.

Enter the EBRD and the International Finance Corporation (IFC), the World Bank's private sector lending arm, with plan B to make a good bank better and all the more attractive to strategic investors.

Strengthening BCR

The combined investment of $222 million by the EBRD and the IFC marked the launch of a three-phase strategy for BCR's privatisation. This investment is a first step, with the government becoming a minority shareholder, complemented by a further sale of eight per cent of shares to bank staff, which has just been completed, and then a sale to a strategic investor by year-end 2006. With the European banking market recovering now, hopes are high that BCR can be successfully privatised in the near future.

The core of EBRD's 'added value' in this financing is an innovative Institution Building Plan, a set of actions designed to strengthen BCR and transform it into an institution   even more attractive to potential strategic investors.

"We identified key risks, carried out on-site due diligence, looked at opportunities such as in retail banking and lending to small businesses, and put solutions in the plan," summarises Nick Kerigan, EBRD Operations Leader on the project.

The goal of the plan is to enhance the implementation of the bank's strategy and operations, and to upgrade key business development, risk and control functions and corporate governance.

"This is not a restructuring plan because BCR is not a troubled bank," Mr Kerigan explains. "The plan is a well-defined description of actions, intended outcomes and milestones. But the work of implementing the plan, co-ordinated by a dedicated unit within BCR, will go on for some time. BCR's management are wholeheartedly behind this process and we have been very encouraged by the enthusiasm and dedication of BCR's staff in making the plan their own."

BCR has already come through many changes. During the communist era, commercial banking was handled by the country's National Bank. In 1990, those services were spun off into the newly-created BCR which, over the past 14 years, has established itself as Romania's leading bank.

Improved focus on customers

The main building blocks of the Institution Building Plan are a better separation of management and supervisory roles, a review of the bank's organisational structure and operations, and integration of the branch network. The latter is a huge task since BCR has 295 branches across the country, employing about 12,000 staff serving over 4.2 million clients. Those clients should start to notice a more customer-focused culture as BCR rolls out it new approach to retail banking and lending. With better sales, marketing and product development, improved customer services and staff training, upgraded information technology and automation, BCR will be more attractive to potential investors.

Comments Maria-Luisa Cicognani, Director for Bank Equity in EBRD's Financial Institutions banking team: " It was helpful to have the IFC on board for this challenging project, which was the IFC’s biggest equity transaction to date."

This EBRD financing is not just about impressing would-be foreign investors: the 25 per cent share purchase will have an important demonstration effect in Romania, signalling confidence in the banking sector and investment environment.

Contact: EBRD Financial Institutions banking team

17 August 2004