Banks aren"t tempted in becoming shareholders in companies that have overdue loans

Bankers think that the project which is currently being reviewed internally by the NBR, by which lenders may receive stock in the companies that have overdue loans, is not to the benefit of the institutions they are managing.

László Diósi, CEO of "OTP Bank" Romania, considers that the project of the NBR could represent a solution, but banks are usually concerned with maximizing their properties.

"I don"t think that banks would make good shareholders, furthermore, if a lot of new shares flooded the stock market, that could have negative effects", László Diósi told us. He also said that in order to raise money, companies would have three outside options: bank loans, issuing bonds, and issuing stock. The chairman of OTP Bank told us the following: "If this solution will be generalized, instead of used in a few specials cases, then banks could easily lose their assets, for instance, by exchanging them for useless investments and interests for which they would need to set up provisions, but this measure would certainly be good for debtors, which would be rid of the responsibility of their debts".

Murat Atay, the managing director of Garanti Bank, considers that the project that is currently being debated by the NBR could only be used by banks in exceptional circumstances, when all the other solutions for restructuring loans failed.

"Converting loans into shares as a restructuring solution involves meeting several conditions, which would be too great anyway to allow this methods to become anything else but a restructuring solution that would only be used exceptionally", said Murat Atay. He added that a greater legislative flexibility is welcome, especially in times of recession, but such solutions will continue to be used only rarely and only after the other restructuring methods have been exhausted. "Normally, a company which is on the brink of insolvency needs to be taken over by a stronger competitor, or by an institution specializing in equity investments".

The draft Regulation by the NBR is currently being reviewed internally and could be put up for public debate. According to the project, the banks may be allowed to receive stakes in the their debtor companies, in exchange for the amounts of the non-performing loans, even if they hold less than 60% of the total debt of the companies in question. According to the Regulation, lenders will only be allowed to receive shares as a last resort, but without however, setting any criteria for evaluating the viability or the profitability of the alternatives available to creditors.

The NBR governor, Mugur Isărescu, said that in the past 20 years, Romania never had such a large number of private companies face troubles making their payments at the same time, as many of them were caught by the economic crisis without reserves, and without cash.