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April 2015
GSS Press
Group Securities Services Monthly
In this issue
Behind the SCENES
2
At a Glance
BULGARIA:
Top outsourcing destination
3
Talking Point
Ivan Takev
(CEO of the Bulgarian Stock
Exchange) 4
Vasil Golemanski
(CEO of the Central Depository AD) 6
Evelina Miltenova
(Executive Director of Raiffeisenbank
(Bulgaria) EAD) 7
research REPORT
Focus Bulgaria:
Will higher public debt lead to
sustainable growth?
8
Market roundup
9
City break
Sofia
Have you met
Maria Todorova-Lazova
12
13
Contact us14
ImPRINT & Disclaimer 15
Attila‘s photo Blog
Events
New government,
new deal
Bulgaria, the country by the Black Sea
coast bearing enticing names such as
Sunny Beach and Golden Beach, has
experienced turbulent times in political
terms. Much to my admiration, the civil
society successfully stood up against a
corrupted elite in 2013, forming a sustainable protest movement. A tug-of-war
between various political groups translated into five different governments within
only two years, but I guess this is a proof
of a young democracy maturing.
The new government coalition will have
to restore the public household after it
was heavily hit by a bank crash last year.
In addition to that, the economy in general still has not returned to anywhere near
the pre-crisis growth levels. Yet, there are
signs of recovery.
down the budget deficit. GSS Press spoke
to the CEOs of both organizations, Mr.
Ivan Takev and Mr. Vasil Golemanski,
to learn about a number of interesting
market initiatives.
The sale of significant stakes in the Sofia
Stock Exchange and the Central Depository are among the measures to drive
Attila Szalay-Berzeviczy
Executive Director
Head of Group Securities Services
Kind regards,
16
This document is intended for
institutional investors only.
GSS Press | March 2015
11
BEHIND THE SCENES
Hungary’s leading investment bank
appoints Raiffeisen as its custodian
The Board of Governors of the Bucharest Stock Exchange (BVB) approved the Hungarian brokerage house Concorde Securities
as participant of the BVB’s trading system on the regulated spot market and its registration in the Participants’ Registry.
”The membership of Concorde Securities
and its direct presence on the Romanian capital market is consistent with the strategy of
the Bucharest Stock Exchange to remove the
barriers impeding the accessibility to the market by intermediaries and investors. It is also
a next step towards the increase of transactional flows into the marketplace of Bucharest, as a future hub for Southern and Eastern
Europe. The internationalization of the BVB is
one of the pillars of the strategy for development”, stated Ludwik Sobolewski, BVB CEO.
Concorde Securities is a member of the Budapest, Frankfurt and Warsaw stock exchanges. The respective investment firm was the
first in top of the trading activities carried out
with shares at Budapest Stock Exchange in
2014.
”Concorde is the largest independent investment service provider in the region. Our
clients are eager to invest in the Romanian
market, and our membership creates the opportunity to serve them at the highest quality.
The valuation of Romanian stocks are attractive compared to regional peers, while many
of them offer high dividend yield, which is a
value in the current low yield environment.
Furthermore, Romania is among the fastest
growing European economies. Its growth
prospects remain also exceptionally strong
thanks to the low indebtedness of the country. We appointed the Romanian subsidiary
of the Vienna based Raiffeisen Bank International as our local remote clearing and
custodian bank, which helped us to become
an active member of the Bucharest Stock Exchange within a short period of time”, stated
György Jaksity, Concorde’s co-founder and
Chairman of Board.
GSS Press | March 2015
Ringing the opening bell in Bucharest: Attila Szalay-Berzeviczy (RBI), György Jaksity (President Concorde),
Ludwik Sobolewski (CEO BVB )
“Raiffeisen Bank International (RBI) has
recently introduced a unique sub-custody
service solution for its institutional clients
operating in Central and Eastern Europe
after it recently overhauled its regional
securities services business line across
15 countries where the bank is present
through its subsidiaries. As a result we
have set up a securities services operations center in Vienna with direct settlement links to the different national CSDs
in the region. This solution represents a
revolutionary approach towards custody,
clearing and settlement as well as to asset servicing in CEE. Now we are proud
to become one of the first foreign direct
members of the Romanian CSD, become
the custodian bank of Concorde Securities in Bucharest and actively support the
growth of the Romanian capital market in
order to obtain the Emerging Market category in the very near future”, said Attila Szalay-Berzeviczy, Executive Director,
Head of RBI’s Group Securities Services.
2
AT A GLANCE
BULGARIA:
Top outsourcing destination
Bulgaria is one of the oldest European
countries situated in the South-East part of
the continent, on the main roads connecting Europe to the Middle East.
The country is a member of the European
Union, NATO and WTO. Its political sustainability, the stability of the national currency, pegged to the euro, the low government
debt and the lowest taxes in the EU (10%
income tax) make the country attractive for
doing business and investments.
Located at the Center-East part of the Balkans, Bulgaria constitutes a natural logistics hub. Transportation of cargo is provided by five pan-European corridors, four
major airports, two main seaports, and numerous ports at the Danube River. One of
the most competitive costs of labour in CEE,
favourable office rents, low cost of utilities,
the second fastest Internet connection in the
world, and the developed financial sector
contribute to the advantageous business
environment in Bulgaria.
In 2014 the real GDP grew by 1.4% yoy
on the back of strong domestic demand,
while the unemployment decreased and the
balance of payments registered a surplus.
Due to its access to key markets - EU (zero
tariffs), Turkey (zero tariffs), CIS, Middle
East and North Africa, the competitive human resources, consisting of a well educated workforce, highly skilled and multilingual - Bulgaria is strategically well positioned
for investments and business. The access to
EU funds and programs contributes for the
improvement of the infrastructure and the
competiveness of the country, giving further
favourable opportunities for attracting stra-
GSS Press | March 2015
tegic investors.
Increasingly, Bulgaria is becoming a top
outsourcing destination for multinational
companies. This is due to the overall excellent business environment, with quality
personnel, foreign language proficiency,
low costs, low tax rates, and, not least, EU
membership.
Bulgaria received a top rank in a prestigious international rating report thanks to
its business process outsourcing industry
(BPO). Over just a year the country ascended 11 positions in the ranking based on
Cushman & Wakefield‘s research of the
most attractive BPO destinations. Bulgaria
is ranked third for 2015 and, according to
the research, has affirmed its positions in
the industry. The research encompasses 36
countries from around the globe and the
ranking given takes into consideration the
doing business conditions, the risks and the
cost. Bulgaria has started to feature regularly in similar indices. Last year, Bulgaria
entered in top 10 of a comparable ranking
published by AT Kearney, where it was the
only Old World country.
New “green” headquarters of
Raiffeisenbank
In January 2015, Raiffeisenbank Bulgaria
moved into a brand new head office building in Sofia. The design and construction
of the new head office are based on a
clean environment concept. The building
features a rooftop garden and internal
“green” walls. It has an energy efficient
infrastructure, including automated climate
control systems, automated electric lighting
control and a reflective glass façade which
reduces energy consumption.
The eight storey building houses the management and all business areas, as well
as the central administration of the bank.
The move put together more than 900
Raiffesenbank employees, 65 departments
and 4 group companies in one business
location, convenient and easily accessible
for clients.
Maria Todorova-Lazova
Head of GSS Bulgaria
3
TALKING POINT
The spark is around
the corner
GSS Press asked Mr. Ivan Takev, CEO of the Bulgarian Stock Exchange – Sofia,
about the most recent developments on the Bulgarian market.
Mr. Takev, what do you consider the major
challenges lying ahead of the Bulgarian
capital market?
The challenges that we face are closely related to the environment that we operate
in. The local market was heavily affected
by the financial crisis and has only partially recovered ever since. The same is true
for the Bulgarian economy in general. Even
though the times of economic recession are
well behind us, we were witnessing periods of either unstable growth or insufficient
invigoration. That is why the market has
been struggling to find the spark that could
enrich its liquidity and rekindle the performance.
The good news is that the latest reports prove to be quite optimistic in terms of macroeconomic expectations. Moreover, there
is evidence
that certain sectors and exportˇ
oriented businesses are recovering faster
than initially expected and that comes just
a few months after we have had readily
accepted the grim outlook of mid-term sluggish economic performance. Thankfully, it
seems that these pessimistic forecasts will
prove to be wrong. That is why overcoming
the hurdle of Bulgaria’s macro-economic
underperformance is our greatest challenge and hopefully will be our greatest achievement.
What about endogenous factors?
For quite some time the most serious test,
and that is not just a local phenomenon,
has been how to navigate through the stormy waters of constantly changing and expanding regulation. It is obvious that the
crisis caught us unprepared in terms of
rule adequacy at that time, but what we
GSS Press | March 2015
have been witnessing since then is a totally
disproportionate approach in forging new
regulations.
It is true that regulators and law-makers
must be able to anticipate where the next
crisis could emerge, but placing strict rules
on absolutely every aspect of our business,
even on those that imply no danger, is
not a good idea and will simply suppress
market efficiency and lead to a manifestation of regulatory arbitrage. In addition to
that, placing firm rules without taking into
account the size of the business in the different EU-members is an approach that is
detrimental to small markets like Bulgaria
and will have long-term consequences on
their performance.
What can be done to strengthen the role
of the BSE - Sofia in further developing the
local capital market?
Speaking about economic growth, one of
Bulgaria's key issues that need to be resolved is how to supply the local business with
real funding alternatives. So far we have
been relying predominantly on the banking
sector, while equity financing has been relatively inaccessible, regardless of its form.
Each company must find its optimal debt/
equity structure but when one of the alternatives is missing, it is quite obvious that
we lack efficiency.
The reasons for Bulgaria's skewed financial system are quite profound. Generally,
they can be found in the short history of the
market and, as a result, in the limited knowledge of local citizens of how they operate.
Unsurprisingly, household banks’ savings
account for half of the country's GDP.
The lack of capital market know-how is
also somewhat true for the businesses, although to a much lesser extent, and there
are companies with huge untapped potential. That is why for the past year we
have been focusing our efforts on improving local market awareness both on capital supply and demand side. For instance,
we took part in, as well as organised by
ourselves, numerous initiatives aiming at
increasing investor education in all of its
aspects. We have been actively working
with universities, student organizations,
NGOs and even high schools because we
believe that building a proper perception
of the modern financial world should start
early enough and not stop afterwards.
How do you approach the demand side?
We re-launched an ambitious project one
year ago to identify prospective non-listed
companies in Bulgaria and present them
the benefits of the equity financing alternatives via the capital market. This has been a
really challenging exercise: we have faced
some serious obstacles such as scarce, old
and sometimes even no public information,
incomplete financial statements, unexplained accounting practices etc. We have
started with a screening list of more than
1,000 companies and subsequently filtered out a shortlist of around 30, for which
it would really make sense to raise capital via the stock exchange. Once we have
established contact with management, we
pass over to the investment bankers who
will guide them through the entire listing
process.
What makes us believe in the success of
this initiative is the fact that there is plenty
4
TALKING POINT
We are also actively working on promoting
long-term investments through the capital
markets regardless of their specific form.
On one side there is plenty of capital that
can be invested into long-term infrastructure
projects as the majority of the institutional
investors, namely the local pension fund
industry, have a long-term horizon. On
the other side the demand is also clearly
present as Bulgaria is looking for a way to
finance its infrastructure projects. And even
though there is both supply and demand
of capital, a gap between them still exists.
of capital around, most of it being held by
institutional investors in search of quality
investment opportunities.
As BSE has been involved with SEE Link,
could you please update us on the progress of this project?
SEE Link is a joint effort of the Bulgarian,
Macedonian and Zagreb stock exchanges
to facilitate cross-border trading among the
three markets. Upon its launch, every trading firm operating in our countries will be
able to trade on the remaining two markets
by using a single order-entry point and a
single communication interface. It may also
decide to stay on the execution side, i.e. to
receive order flow abroad and execute it
on the local exchange. So far the project
has been running smoothly due to proper
planning, good coordination and efficient
project management.
None of the founding exchanges expects
miracles in the early days. We believe,
however, that it will prove a valuable tool
for the buy-side investors from each of the
three countries as there is demand for regional diversification. Here comes SEE Link's
major advantage: we will try to keep it
GSS Press | March 2015
very cost-efficient and even grant free access to our members for the first few years
so that we can gain momentum and make
it a preferred tool to invest in the Balkans.
Once we go live, we expect more exchanges from the region to decide to step in,
thus further increasing the benefits from
SEE Links's single order-entry point. As a
third step we may even open it for trading
firms from other countries that wish to trade
on our markets. And because SEE Link will
be FIX-based, any potential new entrants
will find it easy to accommodate their systems with our platform's interface.
What are the strategic mid-term priorities
for BSE and how do you see the Bulgarian
capital market in the next 3-5 years?
Much of our efforts will be dedicated to
bringing more perspective and transparent
non-listed business onto the exchange. We
will not settle with one-off actions, though.
For every stock market operator this must
be an ongoing process as each business
unit evolves and may reach a point of its
lifecycle where going public is the most
sensible thing to do, even though this might
not have been the case several years ago.
Of course, this is just a general overview
of the process and in order our efforts to
materialize some very specific steps need
to be taken. For instance, if we aim at debtfinanced projects we need a serious reform
of the existing corporate bond market and
the rules it currently follows as they need to
a great extent guarantee the predictability
of investors’ cash inflows and horizon.
Are you also working on improvements in
the post-trading environment?
Also, some much-needed changes in the
post-trading space will significantly improve market accessibility for foreign investors
and will potentially facilitate clearing by
foreign trading members of the exchange.
We do realize the fact that market’s invigoration and liquidity improvement usually
first come from domestic investors and only
afterwards we will be benefiting form more
capital inflows from abroad. That project
had started independently of the SEE Link
initiative but it can be of much importance
if we, together with our partnering exchanges, decide to further expand it towards
direct remote membership in our venues.
It is also worth mentioning that the clearing overhaul, even though being most
beneficial for foreign investors and remote
members, is greatly anticipated and highly
regarded by our local trading community
as well.
5
TALKING POINT
New functionalities
Mr. Vasil Golemanski, CEO of the Central Depository AD, elaborates on new functionalities
and infrastructure improvements for GSS Press.
Mr. Golemanski, we are curious to learn
about the most recent major developments at Central Depository.
A major achievement of the recent years
certainly was the general amendment of
the depository’s internal Rules of procedure
and the related changes of the IT system.
The amendment of the Rules ushered a
number of new functionalities of the system, undoubtedly expected by international investors and global custodians as well
as by the Bulgarian capital market players.
What do these improvements constitute of?
Firstly, the introduction of three types of
membership: clearing members, nonclearing members and direct members.
The opportunity for remote membership is
granted as a result, together with the effect of cost reduction for small investment
intermediaries (brokers). Furthermore, we
implemented a strict module detachment
of the Settlement System and the Registry
System ensuring flexibility and providing
for new functionalities for both systems.
The maintenance of omnibus accounts (the
nominee concept) has been introduced in
the Settlement System along with the maintenance of beneficial owner accounts.
Moreover, new mechanisms for guaranteeing settlement have been developed, including the establishment of a Settlement
Guarantee Fund and provision of financial instruments lending pool. This pool may
also be used for borrowing of financial
instruments, both in cases of lack of FI
and short sales. The Settlement Guarantee
Fund involves buy-in procedures.
As far as financial collaterals for FI transactions are concerned, we established a
system for registration and management,
GSS Press | March 2015
which is also applicable for other operations of FI holders. In addition to that, a
dual connection with the Settlement system
has been introduced: via SWIFT and the
proprietary network of CDAD as both lines might be booked. And we installed
a fully automated system for information
dissemination and processing of corporate actions.
CDAD has been working on improving its
IT infrastructure, could you please update
us on the progress? What will be the
benefits for CDAD members and potential
impact on investors?
The project has reached its final phase
and the CDAD members are conducting
check tests for readiness of their systems’
capability to connect to and operate with
the new system. Upon successful accomplishment of the tests, the launch is scheduled for early April.
At the same time, an additional module is
tested by CDAD, providing the opportunity for messages submitted in the current
format to be automatically converted and
entered in the new system. This will ensure
additional options for CDAD`s members
which are not yet ready to operate with
the new system and its functionalities to
work with the current format messages
and basic features that are available so
far. This will help minimizing the risk at
the time of the system launch, preventing
further delays.
What are the anticipated developments in
regard to the privatization of CDAD and
BSE in a package after it was put on hold
a year ago?
Bulgaria’s new government officially declared its intention to commence and
complete the privatization process of the
Bulgarian Stock Exchange and the CDAD.
In accordance with this intent, the BSE is
included in the program of the Privatization Agency for the current year.
How do you see CDAD’s key role in
further developing the Bulgarian capital
market for the challenges ahead?
CDAD attaches importance to the proper
development of the system for corporate
actions servicing, particularly the opportunity for managing remote general meetings
and proxy voting in the coming years.
Our efforts in the field of clearing settlement shall be focused on the introduction
of a clearing institution or central counterparty (CCP) on the Bulgarian market.
Meeting the requirements of the CSDR
and respectively licensing of the institution under its dispositions is deemed as the
forthcoming direct challenge for CDAD.
6
TALKING POINT
Positive start into 2015
Mrs. Evelina Miltenova, Executive Director of Raiffeisenbank (Bulgaria) EAD,
shared her views on Bulgaria's economic environment with GSS Press.
Mrs. Miltenova, Bulgaria’s hard-won
macroeconomic and financial stability has
been put to the test last year. How favourable are growth conditions currently?
Will an improved environment affect the
capital market development?
Regardless of the summer tensions in the
banking sector (financial instability and illiquidity of the 3rd and 4th largest banks
in the country, followed by a license revocation of Corporate Commercial Bank),
the local banking system has remained
very well capitalized, profitable and highly liquid. A primary reason is that 65%
of the banks operating locally are foreign
owned. Banking once again proved to
be the most resilient segment of the local
economy.
Another confirmation for the macroeconomic and financial stability was the GDP
in 2014 which positively surprised, despite the fact that the fiscal deficit last year
reached an unexpected 3.7% of GDP.
Bulgaria attracts foreign business with
well educated and talented personnel,
foreign language proficiency, minimal tax
rates and some of the lowest levels of labour costs in the EU and, not least, EU
membership. These are some of the main
factors for being a top destination for business processes outsourcing.
In 2014 a landmark M&A transaction
was the acquisition of the largest local
software company Telerik for $ 262.5 mn
by a US company which, though private,
is illustrative for the potential of Bulgarian
companies and scatters hopes for stimulating transactions on the stock market as
well. Actually, the second largest Bulgari-
GSS Press | March 2015
an software company (already first upon
the Telerik acquisition) is currently preparing for an IPO. We are eager to see how
it will be accepted by the market.
Looking forward, the mid-term outlook
has definitely brightened, backed by
the recovered political stability, improving EU markets and strong domestic
consumption which is trending up. On
the external side, however, a slowdown
in the EU could hinder exports bringing
detrimental spillovers from trade and investment channels.
On the positive side, the Government has
just secured EUR 3.1 bn in external longterm debt increasing flexibility to tackle
immediate needs and has bought precious
time to address in depth internal inefficiencies which is a strategic priority.
Could you comment on the perspectives
ahead for capital market participants?
We do really hope that the Bulgarian
capital market will restore its role as a financial mediator in mid-term. In this very
moment, BSE is far away of its best times
in terms of market capitalization and active trading due to a number of factors
and adverse circumstances. We perceive
all this as a natural phase of the development cycle and the necessary education
process of both public companies and
investors. Bulgaria is a relatively young
free market economy, and despite the
wavering, is moving in the right direction.
EU accession 7 years ago gave the country the advantage of adopting EU legislation, stipulating high standards of corporate governance and transparency rules
for stock market participants.
The privatization of both the BSE and the
Central Depositary stays ahead and has
long been expected from the market. We
hope to see a substantial improvement in
the depositary systems and service level
as well as a movement ahead toward establishment of a local clearing house.
Raiffeisenbank Bulgaria has started to offer electronic solutions and to enlarge our
product lists in the Capital Markets business. In the GSS area we have substantially upgraded our service to meet in full
the needs of our local and foreign institutional customers.
Recently, there have been debates regarding design and sustainability of the pension system in the country. How would
you comment on the latest developments?
The debates are still ongoing and the time
frame for them has been pushed recently
till end of April this year. It is difficult to
make an impact analysis at this stage as
the talks among the involved parties are
still open. The positive momentum is that
the industry has a say in the process. The
introduction in optionality to shift from public to private and possible back over time
in the second-pillar pension participation
is to be further assessed and fine-tuned.
A policy not aligned with the social and
economic objectives in the long run poses
a great challenge for the viability of the
pension model and trust in the entire system, and definitely will resonate adversely
at the capital market. The goal is to have
a sustainable system and this is critical
for the financial markets in Bulgaria as a
whole.
7
Bulgaria
Research Report
Bulgaria
BULGARIA
Will higher public debt lead to sustainable growth?
Will higher public debt lead to sustainable growth?
Will higher public debt lead to sustainable growth?
provided by Raiffeisenbank (Bulgaria) EAD
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not affect
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the banking the
sector
and theincurrency
board.
The
caused
by
KTB
and
First
Investment
Bank
(third
largest)
remained
isolated
cases
currency board remained stable: in October 2014 the coverage of the monetary
and
the reached
stability of
the banking
sector required.
and the currency
board.
The
basedid
withnot
FXaffect
reserves
175.5%,
with 100%
On the other
hand,
currency
board
remained
stable:
in
October
2014
the
coverage
of
the
monetary
lending has expanded since the beginning of 2014 and is expected to rise furbaseinwith
reserves
withof100%
required.
On in
theinterest
other hand,
ther
Q1FX
2015
and reached
beyond, 175.5%,
on the back
moderate
declines
rates
lending
has
expanded
since
the
beginning
of
2014
and
is
expected
to
rise
furand high liquidity in the sector.
ther in Q1 2015 and beyond,
on analyst:
the back
moderate
declines(Bulgaria)
in interest
rates
Financial
Emil of
S. Kalchev,
Raiffeisenbank
EAD,
Sofia
and high liquidity in the sector.
Financial analyst: Emil S. Kalchev, Raiffeisenbank (Bulgaria) EAD, Sofia
2010
2011
2012
2013
2014e
2015f
36.1
38.5
39.9
39.9
40.0
41.2
42.9
Real GDP (% yoy)
0.4
2010
1.8
2011
0.6
2012
0.9
2013
1.4
2014e
1.2
2015f
2.1
2016f
Industrial GDP
output(EUR
(% yoy)
Nominal
bn)
2.0
36.1
5.8
38.5
-0.4
39.9
-0.1
39.9
1.8
40.0
1.5
41.2
3.4
42.9
Unemployment
rate (avg, %)
Real
GDP (% yoy)
10.2
0.4
11.3
1.8
12.3
0.6
12.9
0.9
11.9
1.4
11.7
1.2
10.7
2.1
8.6
2.0
10.1
5.8
11.5
-0.4
0.9
-0.1
2.4
1.8
6.3
1.5
4.8
3.4
8.7
10.2
9.4
11.3
4.2
12.3
-1.4
12.9
-1.4
11.9
2.8
11.7
2.9
10.7
Consumer
prices (avg,
% yoy)
Nominal industrial
wages
(% yoy)
2.4
8.6
4.2
10.1
3.0
11.5
0.9
-1.2
2.4
1.9
6.3
3.2
4.8
Consumerprices
prices(avg,
(eop,%%yoy)
yoy)
Producer
4.5
8.7
2.8
9.4
4.2
-1.6
-1.4
0.1
-1.4
3.0
2.8
3.0
2.9
General budget
of GDP)
Consumer
pricesbalance
(avg, % (%
yoy)
-4.0
2.4
-2.0
4.2
-0.4
3.0
-1.9
0.9
-3.6
-1.2
-2.0
1.9
-1.9
3.2
16.2
4.5
16.3
2.8
18.5
4.2
19.0
-1.6
28.8
0.1
24.0
3.0
22.0
3.0
-1.5
-4.0
0.1
-2.0
-0.8
-0.4
1.9
-1.9
0.3
-3.6
-0.5
-2.0
-0.8
-1.9
13.0
16.2
13.3
16.3
15.6
18.5
14.4
19.0
15.9
28.8
17.9
24.0
20.2
22.0
102.7
-1.5
94.3
0.1
94.3
-0.8
93.5
1.9
100.2
0.3
96.2
-0.5
93.8
-0.8
1.96
13.0
1.96
13.3
1.96
15.6
1.96
14.4
1.96
15.9
1.96
17.9
1.96
20.2
1.47
102.7
1.41
94.3
1.52
94.3
1.47
93.5
1.47
100.2
1.67
96.2
1.64
93.8
(Bulgaria) JSC
Source:
Thomson
Raiffeisen RESEARCH
EUR/BGN
(avg)Reuters, wiiw, Raiffeisenbank
1.96
1.96
1.96
1.96
1.96
1.96
1.96
USD/BGN (avg)
1.47
1.41
1.52
1.47
1.47
1.67
1.64
Key economic
gures
Nominal
GDP (EURbn)
and forecasts
Nominal industrial
Industrial
output (% wages
yoy) (% yoy)
Producer
prices rate
(avg,
% yoy)
Unemployment
(avg,
%)
Public debtprices
(% of (eop,
GDP) % yoy)
Consumer
Current account
General
budget balance (% of GDP)
Officialdebt
FX reserves
(EUR bn)
Public
(% of GDP)
Gross
debt
(% of GDP)
Currentforeign
account
balance
(% of GDP)
EUR/BGN
Official FX (avg)
reserves (EUR bn)
USD/BGN
(avg)
Gross
foreign
debt (% of GDP)
Source: Thomson Reuters, wiiw, Raiffeisen RESEARCH
28
28
GSS Press | March 2015
Please note the risk notications and explanations at the end of this document
Please note the risk notications and explanations at the end of this document
2016f
8
Market roundup
Mensur Hodžic,
Head of GSS Croatia
CROATIA
New laws on recovery of credit institutions and investment companies
In February the Croatian Parliament adopted a set of new laws
with an aim to align Croatian legislation with the European
Union Bank Recovery and Resolution Directive (BRRD). The new
rules will harmonize and improve the tools for dealing with
bank crises across the EU.
The following laws have now been adopted in order to establish and/or improve the legal framework for recovery of credit
institutions and investment companies:
•the Credit Institutions and Investment Companies Recovery Act
•the Law on Amendments to the Credit Institution Act
•the Law on Amendments to the Capital Market Act
As a novelty in Croatia, the Credit Institutions and Investment Companies Recovery Act
will introduce a Recovery Fund managed by the State Agency for Deposit Insurance and
Bank Resolution. An obligation to contribute to the Recovery Fund has been imposed
on the credit institutions and investment firms including their subsidiaries licensed for the
territory of Croatia.
According to the Law on Amendments to the Credit Institution Act, provisions governing
the bankruptcy and compulsory liquidation of credit institutions have been improved
and prescribed in more detail.
Certain provisions of the Law on Amendments to the Capital Market Act apply to the
recovery of credit institutions and investment companies:
•Legal consequences of initiating the procedure triggered by insolvency over the central counterparty have been prescribed with an aim to protect the assets of central
counterparty members and clients of its members;
•In relation to the settlement and clearing process, new provisions covering bankruptcy, recovery and liquidation of counterparties involved in clearing and settlement of
transactions on a regulated market or on a MTF were introduced. The new procedures
will not legally affect funds/securities held on deposit accounts, omnibus accounts,
securities accounts or transaction accounts of the respective member or legal entity
involved in the settlement of transactions to the extent that these funds/securities are
used for execution of the settlement process by the Central Clearing and Depository
Company.
•An early intervention scheme has been implemented. This concept refers to investment companies that are obliged to have an initial capital above HRK 6 mn. The measure will be activated e.g. in the case of undermined liquidity or capital adequacy or
decline in regulatory capital.
Spotlight news
UA: Enforced liabilities for bank
owners
The Parliament has approved changes to the Code on administrative
violations and the Criminal Code of
Ukraine, which substantially increased the responsibility of top managers, owners and beneficiaries of a
bank with respect to the depositors
and creditors. The law extends the
list of persons related to the bank
and gives the power to the National
Bank of Ukraine (NBU) to self-determine such persons, regardless of the
information provided by the bank.
Another purpose of the law is to
eliminate a possible preferential
treatment of bank-related persons in
banking transactions. For example,
issuance of a loan secured with a
smaller cover than what is typically
required from other clients or paying
a higher interest on the deposit of a
bank-related person comparatively to
other deposits will make such a loan
or deposit agreement invalid from
the date of execution. Bank-related
persons will be held responsible for
any actions influencing the financial
status of the bank. The law envisages
a criminal liability for any actions
which lead to bank insolvency, if this
resulted in essential material damages to the state or creditors.
In addition, the Law on Amendments to the Capital Market Act introduced the following
amendments:
•Definition of a “kill switch”- risk management mechanism in order to enable the stock
exchange, investments companies, the central counterparty and its members to monitor and manage the exposures in their activities;
GSS Press | March 2015
9
•Prescription of reports mandatory for the central counterparty toward the Croatian
Financial Services Supervisory Agency;
•Authorization for the Central Clearing and Depository Agency to distribute data about
the issuer, beneficial owner or a member to the Croatian National Bank (CNB) for
statistical purposes. (CNB has an obligation to keep the mentioned data as confidential.)
Our View
The establishment of a framework for the recovery and resolution of credit institutions and
investment firms will contribute to the protection and stability of the financial industry in
the Republic of Croatia. The most important goals – to protect depositors and preserve
basic functions (e.g. proceedings of payments) – are likely to be reached. Appropriate
instruments of internal recovery will ensure that shareholders and creditors of collapsing
companies take a part of the expenses resulting from the failure of an institution. In addition to that, the provisions regarding the amendments of the Capital Market Act will ensure
further harmonization with European Union legislation.
Radek Ignatowicz,
Head of GSS Poland
Poland
FSA’s financing to be divided among market users
A new parliamentary project has emerged in the recent weeks,
aiming to change the rules governing financing of the Polish
Financial Services Authority (PFSA). The suggested changes
propose to spread the costs of capital market supervision
more evenly across market participants. Currently, the majority
(around 90%) of KNF’s operations are covered by fees paid by
the Warsaw Stock Exchange (WSE) and KDPW. According to
the proposal, the allocation of contributions for KNF’s net budget
(which covers 75% of the supervisory costs) would be divided
between brokerage houses: 14.5%, investment fund companies: 18%, public companies:
24%, the Warsaw Stock Exchange: 20% and KDPW: 23.5%. The remaining 25% are
considered to be covered by other institutions, such as banks (13.5%) and insurance
companies (1.5%).
The proposed changes were welcomed by KDPW and the WSE. The current fee split was
introduced over a decade ago, under completely different market conditions, but in the
meantime these contributions have become a significant part of the institutions’ operational
costs. It has been reported that, in 2014, KDPW’s contributions to the capital market supervisory amounted to 20% of the CSD’s annual operational costs. When comparing this
figure to central depositories’ contributions towards market supervision in other markets
around the world, the KDPW’s amount is considerably higher.
For WSE’s part, subject to the final wording of the Act, the changes will allow for lower
stock exchange fees. This is good news for WSE’s trading members, however, in order to
expand the group of beneficiaries of the fee reduction, brokerage houses would have to
reflect such changes in their own fee schedules too. WSE’s participants, however, have
not been too supportive of this project. They argue that due to shrinking commissions,
GSS Press | March 2015
10
brokerage services have not been profitable in the recent years. Moreover, the proposed
rules of contributing to PFSA’s financing will become a substantial burden, especially in
light of the continuous consolidation of this type of business in the market, as less and less
brokerage houses will have to carry on covering the proposed 14.5%. The changes are
proposed to be implemented at the beginning of next year.
Our View
The project is likely to have a meaningful impact on the Polish capital market. By reducing
KDPW’s contributions, it is expected that the CSD’s capacity will expand in order to further
enhance its services and build a stronger and more competitive position in the international arena. As for the WSE, smaller stock exchange fees would increase the attractiveness
of the Polish capital market in the eyes of foreign as well domestic investors and, hopefully,
result in more trading activity. On the other hand, it should be noted that the whole exercise is not targeting at a better use of the contributions but rather their different allocation
among the market players. There will be both beneficiaries and victims of such reshuffling
but one thing is somewhat certain - the supervision costs are unlikely to go down. As there
are more regulations and EU directives coming in, all requiring analysis at the supervisory
level, in the long run, such costs may become a very large burden for market participants.
As a result of these costs, maintaining a sustainable business model may prove to be challenging, This, in turn, may curb the development of the capital market.
Bogdana Yefremova,
Head of GSS Ukraine
UKRAINE
Legislation aimed at protection of investor rights
The bill on the protection of investor rights in Ukraine passed the
first reading. Most importantly, the document introduces the concept of a derivative suit, detailing and explaining the respective
right and describing the procedure for its practical application.
This possibility is envisaged for investors holding in total 5% and
more in the company.
The bill also determines management responsibility in case of
unlawful actions resulting in damages for the company.
Other measures stipulated by the bill include re-registration of “quasi-public” companies
into private joint-stock companies, the introduction of the concept of independent directors to represent the interests of minority shareholders, and a possibility to pay dividends
directly to shareholders rather than through the CSD.
Our View
According to the explanatory note, the purpose of the bill is a deregulation of business
activities of joint-stock companies and, at the same time, the implementation of tighter
requirements. While the concepts introduced by the bill can be quite beneficial for the local
market, a more detailed analysis of the impact will only be possible after the document
has passed its final reading, expected beginning of April.
GSS Press | March 2015
11
City Break
Sofia: “It grows but does not age”
Sofia's development as a significant settlement owes much to its strategic central location – in the middle of the Balkan Peninsula. Three mountain passes lead to the city,
which have been key roads since antiquity,
connecting the Adriatic Sea and Central Europe with the Black and Aegean Seas.
The city originated around the 8th century
BC, close to the thermal springs of an ancient Thracian settlement, later called Serdica
by the Romans who conquered it. During
the Roman age (1st – 4th centuries AD), the
city flourished as the center of Inner Thrace,
and later became part of the Byzantine Empire under the name Triaditsa.
Since the late 14th century and until the
70ies of the 19th century, the Bulgarian
state, was under Ottoman domination. The
present name of the city dates from the 15th
century and derives from the Christian Saint
Sofia, it was given to one of the churches
after the termination of the Ottoman era.
Nowadays Sofia is the economic and administrative heart of Bulgaria. The population
of the Bulgarian capital is approximately
1.3 mn, permanently increasing through the
years – as if proving the truth of the words on
its coat of arms: “It grows but does not age”.
From oriental style to Art Nouveau
A number of ancient buildings in the city center remind us of the Roman, Byzantine and
medieval Bulgarian times. These include the
4th century Rotunda of St. George, the walls
of the Serdica fortress and the partially pre-
GSS Press | March 2015
served Amphitheatre of Serdica, which has
remained inside the Arena di Serdica hotel.
At the time Sofia was emerging from Turkish bondage, it was a typical oriental settlement. Later on, the economic upheaval in
the Bulgarian state attracted many foreign
specialists. Most of them came from AustriaHungary and settled mainly in Sofia, some
of them even occupying key positions such
as chief architect, etc. Under their influence,
the panorama of the city was enriched with
remarkable buildings and the city started to
be shaped in the then modern Art Nouveau
style.
One of the landmarks in Sofia are the “yellow cobbles” in the very heart of Sofia, where the most important government buildings
are located. The yellow cobbles are actually
ceramic paving stones with golden-yellow
colour. There are a lot of legends about
them – one of them for example that they
were given as present for the wedding of
the Bulgarian Czar (King) Ferdinand Saxe
Coburg Gotha and Maria Louisa.
Some of my top picks for
‘pit stops’ to charge one’s
batteries are:
Modern cuisine
Esterhasi Bar, Desserts & Dinner
21 Tzar Osvoboditel Blvd, 1504 Sofia
Bulgarian cuisine
Hadjidraganov’s Houses
(Hadjidraganovite Kashti)
75, Kozloduy Str., 1202 Sofia
Bar
Black Label
7 Tzar Osvoboditel Blvd, Sofia center
oneself next to a film star, because a lot of
Hollywood films are produced in the film studios, located in the city.
After-work skiing
Sofia is one of the few capitals in which one
can use the city transport to go skiing in winter or tracking in summer, on Vitosha Mountain, whose highest peak is 2,290 m above
sea level. During the winter season many
young people go night skiing after work.
Home of mineral water and yogurt
Sofia is also known for its numerous mineral
and thermal springs. One does not need to
buy mineral water – in the old city center
one can fill bottles free of charge and at
any time. There are a lot of stores selling bio
food and bio products in the small streets
around and everywhere in the city center.
And no doubt that the Bulgarian yogurt is
the best in the world. This is thanks to the
unique Lactobacillus Bulgaricus bacteria
used for its production that can only be
found on the territory of the country.
The Bulgarian capital is a nice place for
entertainment, where one can suddenly find
Maria Todorova-Lazova
Head GSS Bulgaria
12
Have you met
Custody from scratch
Maria Todorova-Lazova, Head of GSS Bulgaria, provides an insight into her profession.
Where did you start your professional
career?
My first job right after high school was at
one of the best Bulgarian foreign trade
companies exporting Bulgarian electronics
worldwide. Actually it was the only exporter of the Bulgarian computers (Pravets),
electronic calculators (Elka) and other
electronic disk devices. They were part of
the most strategic, innovative and profitable areas of the Bulgarian economy in the
middle of the 1990s. Meanwhile, I graduated in International Economic Relations
and HR. One of my passions are foreign
languages and I studied Russian, English
and basic Greek from my childhood.
By mere chance, I was offered a position
at the international division of the local
Economic Bank and started my banking
career. The bank sent me to a training in
International Banking in Frankfurt, Germany. This unique opportunity further inspired
me to pursue my career in the international
realm.
What do you like about your job?
Particularly, I have enjoyed the international aspect of my positions occupied over
the past 20 years, keeping me part of the
global processes and touching upon different cultures. It gave me the opportunity to
work with top corporate and FI clients all
around the world. This requires a thorough
knowledge of the local market specifics as
well as of the constantly changing international industry standards. For more than 15
years I’ve built the custody business at ING
from scratch, particularly focusing on servicing foreign institutional investors.
GSS Press | March 2015
When I joined Raiffeisen Bank a year and
a half ago, it was truly exciting and challenging for me to further strengthen the custody business following the best international practices. I felt like I was joining a new
shining star, though the bank is strongly positioned in the Bulgarian market. And the
recent Innovation Award in Securities Services by Global Custodian magazine really justified my feeling and expectations.
Which main difficulties can you mention
about your job?
The small size of the Bulgarian market is
generally quite challenging. In some cases this means that meeting the highest
demand is rather building up a long-term
partnership than an immediate business
opportunity. But on the other hand, I enjoy
working with top multinationals and jointly
lobbying for protecting foreign investors’
interest or for further driving the local market developments.
What are the biggest potentials you see in
your market?
In principle, the Bulgarian market has been
functioning within a well-organized legal
and institutional framework. Now that Bulgaria is more globally integrated, it mainly
follows the trends on the international markets. This also triggers stricter regulatory
requirements, new control functions and
additional responsibilities for custodian
banks, and last but not least enhanced risk
management rules and adequate controls.
All these factors will increaslingly play a
key role to differentiate a prudent custodian bank when entrusting client assets, and
therefore the price will not be the only selling point.
How do you spend your spare time?
I truly enjoy swimming, not only in custody waters but in the famous Bulgarian
thermal and mineral springs. Being close
to the nature either on SPA relaxation, skiing, fishing or mountain hiking recharges
my batteries. And the Bulgarian nature really offers plenty of fantastic opportunities.
I am also interested in reading books on
astrophysics, spirituality and global wellbeing. Taking care of my family gives me
additional inspiration to become even better in what I do.
What is your favorite place in your city?
The outdoor swimming pool Korali (Corals)
on Lake Pancharevo, supplied by mineral springs on the lake's western shore. I
particularly enjoy winter times, when one
can swim in ~33° mineral waters while the
outside temperature is about zero or less.
And it’s a great pleasure, no matter if it is
raining or snowing.
13
CONTACT US
GSS Central Team
Raiffeisen Bank International AG
Am Stadtpark 9
1030 Vienna, Austria
www.rbinternational.com
Attila Szalay-Berzeviczy
Head of GSS
[email protected]
Phone: +43 1 71707-8252
Jürgen Sattler
Head of GSS Regional Management
[email protected]
Phone: +43 1 71707-1882
Bettina Janoschek
Head of GSS Sales & Relationship Management
[email protected]
Phone: +43 1 71707-1820
Austria
Raiffeisen Bank International AG
Am Stadtpark 9
1030 Vienna, Austria
Anita Fröch
Head of GSS Austria
[email protected]
Phone: +43 1 71707-3040
www.rbinternational.com
Albania
Raiffeisen Bank Sh.a.
“European Trade Center”
Bulevardi “Bajram Curri” Tirana
Mirela Borici
Head of GSS Albania
[email protected]
Phone: +355 4 2381000-1074
www.raiffeisen.al
Belarus
Priorbank JSC
31-A, V. Khoruzhey Str.
220002 Minsk
Yury Dorofey
Head of GSS Belarus
[email protected]
Phone: +375 17 2899102
www.priorbank.by
Bosnia and Herzegovina
Raiffeisen BANK d.d.
Bosna i Hercegovina
Zmaja od Bosne bb
71000 Sarajevo
Draženko Bobaš
Head of GSS Bosnia
[email protected]
Phone: +387 33 287-153
www.raiffeisenbank.ba
GSS Press | March 2015
Bulgaria
Russia
Raiffeisenbank (Bulgaria) EAD
55, Nicola Vaptzarov Blvd., Business Center
Expo 2000, 1407 Sofia
Maria Lazova
Head of GSS Bulgaria
[email protected]
Phone: +359 2 91985-463
www.rbb.bg
AO Raiffeisenbank
Smolenskaya-Sennaya Sq. 28
119020 Moscow
Evgenia Klimova
Head of GSS Russia
[email protected]
Phone: +7-495-721 9900
www.raiffeisen.ru
Croatia
Serbia
Raiffeisenbank Austria d.d.
Petrinjska 59
10000 Zagreb
Mensur Hodžic´
Head of GSS Croatia
[email protected]
Phone: +385 1 6174-327
www.rba.hr
Raiffeisen banka a.d.
Djordja Stanojevica 16
11070 Novi Beograd
Ivana Novakovic´
Head of GSS Serbia
[email protected]
Phone: +381 11 2207572
www.raiffeisenbank.rs
Czech Republic
Slovakia
Head of GSS Czech Republic
[email protected]
Phone: +420 234 40-1481
www.rb.cz
Tatra banka, a.s.
Hodžovo námestie 3
81106 Bratislava
Katarina Marková-Rusnáková
Head of GSS Slovakia
[email protected]
Phone: +421-2-591 91111
www.tatrabanka.sk
Hungary
Slovenia
Raiffeisen Bank Zrt.
Akadémia utca 6
1054 Budapest
Babett Pavlics
Head of GSS Hungary
[email protected]
Phone: +36 1 484-4395
www.raiffeisen.hu
Raiffeisen Banka d.d.
Zagrebška cesta 76
2000 Maribor
ˇˇ
Primož Kovacic
Head of GSS Slovenia
[email protected]
Phone: +386 22293119
www.raiffeisen.si
Poland
Ukraine
Raiffeisenbank a.s.
Hvezdova 1716/2b
14078 Prague 4
ˇ
Vit Cermák
Raiffeisen Bank Polska S.A.
(Raiffeisen Polbank)
Piękna 20 Str.
00-549 Warsaw
Radek Ignatowicz
Head of GSS Poland
[email protected]
Phone: +48 22 585-2000
www.raiffeisen.pl
Raiffeisen Bank Aval JSC
9, Leskova Str.
01011 Kiev
Bogdana Yefremova
Head of GSS Ukraine
[email protected]
Phone: +380 44 49879 32
www.aval.ua
Romania
Raiffeisen Bank S.A.
246C Calea Floreasca
014476 Bucharest 1
Andrei Mezdrea
Head of GSS Romania
[email protected]
Phone: +40 21 30612-89
www.raiffeisen.ro
14
Imprint & Disclaimer
Imprint
1) Information requirements pursuant to the Austrian E-Commerce Act
Raiffeisen Bank International AG, Registered Office: Am Stadtpark 9, 1030 Vienna. Postal address: 1010 Vienna, POB 50
Phone: +43-1-71707-0, Fax: + 43-1-71707-1715
Company Register Number: FN 122119m at the Commercial Court of Vienna
VAT Identification Number: UID ATU 57531200
Austrian Data Processing Register: Data processing register number (DVR): 4002771
S.W.I.F.T.-Code: RZBA AT WW
Supervisory Authorities:
As a credit institution pursuant to § 1 of the Austrian Banking Act, Raiffeisen Bank International AG is subject to supervision by the Financial Market Authority and the
Austrian Central Bank. Further, Raiffeisen Bank International AG is subject to legal regulations (as amended from time to time), in particular the Austrian Banking Act
(Bankwesengesetz) and the Securities Supervision Act (Wertpapieraufsichtsgesetz).
Membership: Austrian Federal Economic Chamber, Federal Bank and Insurance Sector, Raiffeisen Association
2) Statement pursuant to the Austrian Media Act
Publisher of GSS Press: Raiffeisen Bank International AG, Am Stadtpark 9, A-1030 Vienna
Media Owner of GSS Press: Zentrale Raiffeisenwerbung, Am Stadtpark 9, 1030 Wien
Producer: Marketing, Raiffeisen Bank International AG, Am Stadtpark 9, A-1030 Vienna
Editors: Jürgen Sattler, Raiffeisen Bank International AG, Am Stadtpark 9, A-1030 Vienna
Society Commitee Zentrale Raiffeisenwerbung:
Dr. Leodegar PRUSCHAK (Chairman), Petra WALTER (Deputy Chairman), Stephan MARENT (Deputy Chairman)
Other committee members Zentrale Raiffeisenwerbung:
Mag. Rainer SCHNABL, Franz POSPISCHIL, Bernd NÖHRER, Mag. Maximilian EDER, Mag. Gertraud FRANK, Mag. Martin KOFLER, Markus FRIEDRICH,
Katharina STÖGNER, Mag. Clemens GANTAR
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