The BSE wants to take 6.3 million lei out of the Central Depository

• The request of the BSE raises doubts over the plans of the Central Depository to become a bank

The Bucharest Stock Exchange (BVB), the majority shareholder of the Central Depository, has proposed the payout of 6.3 million lei in dividends out of the profit for 2007 of the institution, according to sources who did not wish for their names to be disclosed. At the same time, the BSE has also requested the increase of the share capital of the Central Depository by about 3.5 million lei, of which 1.4 million out of the profit made in 2007 and 2.1 million out of the profit for 2006.

The shareholders of the Central Depository were called to decide on this matter in the General Shareholder Meeting scheduled at the end of the month. If its proposal were adopted, the Bucharest Stock Exchange, which has a stake of 66% in the Central Depository, would earn 4.15 million lei.

The request of the BSE caused opposition in the market, causing some voices to express worry that this move might jeopardize the plans of the Depository to grow, by decapitalizing it.

"The profit of the year 2007 was not allocated because the Depository came to the conclusion that it needed money to implement its plans of becoming a central counterparty or to gain bank status", the sources in question said, who added: "There even was talk about using that money to perform a share capital increase, but at the time, there were some troubles with some shares owned by Gelsor, which is why the plan was abandoned".

Last year, Adriana Tănăsoiu, the general manager of the Depository said that she wanted the company to be able to provide its customers with services specific to cash accounts, following the model of Euroclear and of the depositories of Austria and Switzerland. At the time, Mrs. Tănăsoiu said that the Depository would need additional funds for these plans, but did not mention a clear figure.

Among the potential alternatives to be used in order to make money, Adriana Tănăsoiu included the use of the company"s own reserves, the taking out of a bank loan or a share capital increase.

"I find the proposal of the BSE to take money away from the Depository, just as the latter wanted to become a central counterparty. In order to do that, the Depository would need a large capital base. Under these circumstances, the request of the BSE to decapitalize the institution raises doubts because it doesn"t make sense as a business decision. Perhaps the BSE is trying to refill its own coffers at the expense of the Central Depository after paying out dividends", other market sources said for "BURSA".

On the other hand, supporters of the BSE"s plan explained that the request of the BSE is legitimate, given the fact that the profit of the Depository made in the year 2007 had remained unallocated, with seemingly no concrete destination. However, the same argument was used by some of the shareholders of the BSE who requested the reduction of the face value of its stock from 10 to 5 lei and the payment of the remaining amount in the form of an extraordinary dividend, as the BSE had about 63 million in cash which it kept in bank deposits.

The management of the BSE did not reply to our requests for comments on the reasons behind the proposals it sent to the shareholders of the Central Depository.