By selling the Commercial Bank, we will reduce the share of domestic banks in the Serbian banking market to below 15 percent, thus practically giving up financial sovereignty. With this assessment, economist Borislav Borovic has only joined those who have lately pointed out the reasons why the Commercial Bank should not be sold, which is majority owned by the state of Serbia.
The expectation that this issue will once again be weighed down seems to have diversified the statement from the Ministry of Finance. Nova Ljubljanska Banka (NLB) has submitted the best offer for the purchase of the Commercial Bank shares and has been invited to enter into negotiations with a view to concluding the purchase contract, the Ministry said.
To make the irony bigger, it is a Slovenian bank, which is the heir to Slavija Bank, which, after the breakup of Yugoslavia, owed its citizens foreign currency savings, according to which Commercial Bank is the strongest in Serbia.
The Commercial Bank is the third largest in the country with a profit of more than 70 million euros and it is difficult to understand the reasons for its sale.
“It is quite certain that we also renounce financial sovereignty with this sale, with a tendency to lose it completely. Whoever controls the financial system of a country, governs its economy, and, ultimately, the country itself”, Borovic points out for Sputnik.
Noting that a new financial turmoil is increasingly likely to happen in the world and is only a matter of its intensity and duration, he adds:
“By what defense mechanisms will Serbia defend itself, even if its fragile potential, even with the Commercial Bank, is almost devastated without it. It is a system bank with the largest foreign currency savings and the densest network of branches in Serbia”.
That is why Borovic thinks it is pointless to deal with the price of the shares at the moment, as much as offered by which bank to buy the Commercial Bank, what it means in relation to its book value, whether to go for privatization right now or later. The president of the Forum of Independent Economists recalls that for every arrival of a foreign bank in Serbia, its representatives had a logical explanation, that their arrival was a significant and necessary step to “escort” investors from their countries to our market. This, he says, logically implies a contra – if, by selling the Commercial Bank, with a market share of close to 11 percent, we reduce the share of domestic banks in Serbia to below 15 percent – who will monitor our economy?
Borovic points out that the state’s stay in the bank implies complete professionalization of its management, as the successful banks in the world do.
The issue of Commercial Bank’s sale is extremely important, as indicated by the fact that at the Faculty of Economics in Belgrade, the Chair of Economic Policy and Development organized a discussion on December 16th on the topic “Why Commercial Bank shouldn’t be sold”. On this occasion, a number of facts were pointed out that support this, among other things, that at the end of the third quarter of this year, the bank operated successfully: return on share capital amounted to 13.7, and return on assets 2.3%. According to the NBS, at the half of the year Commercial Bank achieved a level of profitability significantly higher than the average of the banking sector of Serbia, where the majority of foreign banks are.
Removing almost all of the banking sector to foreigners would, as warned in the lecture, result in the country’s monetary sovereignty being lost. The example of Poland could be instructive for Serbia. It was least affected by the recent global financial and economic crisis, inter alia, because the Government and the Central Bank, driven by national interests, pursued a strategic commitment – to reduce foreign capital in the country’s banking sector to below 50 percent.
The country controls two of the largest banks in Poland, which cover one third of the market.
Similar changes in the ownership structure of the banking sector have occurred in Hungary. After the outbreak of the global financial crisis in 2008, the state nationalized or purchased a minority stake in six domestic banks, increasing the state-controlled stake in the banking sector to 50.5 percent at the end of 2018. Five years earlier, it was 30 percent.
These days, the Governor of the National Bank of Serbia, Jorgovanka Tabakovic, stated that the state of Serbia is capable of managing the Commercial Bank.
Asked if she would sell the bank, which has an annual profit of 75 million euros for 450 million, which was an unofficial speculation, the governor was clear:
“Of course not”.
