ISĂRESCU DOUBTS THAT ANYTHING CAN BE RECOUPED Volksbank, Banca Transilvania's bank, the hot potato that Ciorcilă is holding

NBR governor Mugur Isărescu yesterday said that Volksbank has always been a distressed institution and that "there have been heavy negotiations to allow the assets of Volksbank to be sold at a price which would allow Banca Transilvania to recoup something, if we can actually say that".

Going by the statements of the governor of the Central Bank, it follows that there isn't much for Banca Transilvania to buy from Volksbank.

Furthermore, Nicolae Cinteză, the head of the Oversight Division of the NBR, announced, in the chamber of Deputies, that Banca Transilvania is required, according to the contract, to convert the loans denominated in Swiss francs into lei, at a discount.

It looks like Banca Transilvania would be making a loss on that as well.

We can now make sense of the hesitating statement, made in December 2014, by the president of BT, Horia Ciorcilă, who said that the deal between BT and Volksbank has a certain level of uncertainty, because the negotiated terms could still see changes.

Shares of Banca Transilvania fell yesterday 1.56% yesterday, from 2.1010 lei to 2.0870 lei.

Brokers feel that this drop may have come on the back of the doubts expressed by the governor of the NBR.

The head of the National Bank of Romania said: "Volksbank has been a bank that had troubles in Romania, and as far as we are allowed to speak about a specific bank - I've told you that we have severe restrictions on speaking about a single bank -, I can confirm this.

The issues came from the top, from the management of the bank, from the assumption of risks, to the massive involvement in foreign currency lending and all the way until the end. Thus, their solution has been to sell the bank at a discount. There have been heavy negotiations for the bank's assets to be sold at a price which would allow the shareholder (ed. note: Banca Transilvania) to recoup something, so to speak. But I don't think that it would be good to find out more than that from the NBR".

Brokers feel that "the Governor should refrain from making such statements, because he influences the market", and that "it is normal for trades involving TLV shares (ed. note: the symbol of the Banca Transilvania stock) to be influenced by the statement of Mr. Isărescu, because the NBR knows more than any analyst what is found in the portfolio of Volksbank".

Most of the liquid companies' stocks dropped yesterday, but TLV shares saw a bigger drop than the others, notes Nicu Grigoraş, Front Office Director and Investment Banking Analyst at Intercapital Invest.

He said: "Lately, there have constantly been unpleasant news concerning banks, and investors pay a lot of attention to that type of information. If tomorrow (ed. note: today) the governor's statement gets broadcasted more intensely than today (ed. note: yesterday), the price of TLV shares could drop even further".

When asked whether he thinks that Volksbank was an institution that was well supervised by the NBR since the beginning of the crisis, Mugur Isărescu responded that the bank "was not a fortunate case, even though it was an Austrian bank, and that thing is well known domestically and abroad as well".

Omer Tetik, general manager of Banca Transilvania recently said: "We want to help the customers of Volksbank Romania that have borrowed in Swiss Francs. Essentially, we want to replicate the good practices of Banca Transilvania in our relationship with those customers".

Some of the customers who borrowed from Volksbank actually include NBR Governor Mugur Isărescu himself, who took out a loan denominated in lei, in 2006, which he then fully repaid in 2009.

• Mugur Isărescu: "The minimum required reserves - a cost which would allow the NBR to discourage lending in foreign currencies"

Speaking about the minimum required reserves commission which Volksbank used to charge in the case of loans granted in 2007-2008, Mugur Isărescu mentioned that the minimum required reserves were a cost through which the NBR was discouraging lending in foreign currencies: "The signal we were sending was that we were discouraging lending in foreign currencies. Banks have tried to do a kind of a PR campaign and they were telling their customers: «We want to give you cheap loans, but the NBR won't let us»".

The high level of the Minimum Required Reserves imposed by the Romanian Central Bank should have been included in a hike of the borrowing cost, but not in a MRR commission, as the minimum required reserve is a monetary policy measure, he said. "How can you charge commissions for a monetary policy measure? Then let's charge a commission when we raise or cut the key policy rate!"

Under these circumstances, the NBR intervened, at the time, ordering Volksbank to eliminate the RMO commission.

In 2010, the managers of the bank in question were removed, after they had violated several regulations, according to claims by the NBR.

The latter withdrew the executive licenses of Gerald Schreiner (former Volksbank CEO) and Herwig Burgstaller (former vice-president of the same bank).

The two former Volksbank executives sued the Board of Directors of the NBR, disputing the NBR's decision, but they lost the lawsuit.