VZCZCXRO3943
RR RUEHAG RUEHAST RUEHDA RUEHDBU RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA
RUEHLN RUEHLZ RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHBM #0036/01 0100717
ZNR UUUUU ZZH
R 100717Z JAN 07
FM AMEMBASSY BUCHAREST
TO RUEHC/SECSTATE WASHDC 5827
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC

UNCLAS SECTION 01 OF 04 BUCHAREST 000036 
 
SIPDIS 
 
STATE FOR EUR/NCE - AJENSEN, EB/IFD 
TREASURY FOR LKOHLER 
USDOC FOR KNAJDI 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EFIN ETRD EIND RO
SUBJECT:  ROMANIA'S BANKING SYSTEM: CLEAN BILL OF HEALTH 
 
 
This cable is Sensitive But Unclassified.  Please handle 
accordingly. 
 
¶1.  (SBU) Summary: Western banks play a dominant role in  Romania's 
growing economy, controlling slightly over 83 percent of the 
country's banking system.  This situation, coupled with tight 
regulation and close supervision by the Romanian Central Bank (BNR), 
leaves Romania with relatively few worries regarding money 
laundering and large scale banking fraud.  End summary. 
 
Western Banking Brands Dominate the Market 
------------------------------------------ 
¶2. (U) Western banks dominate Romania's savings and lending markets, 
controlling over 83 percent of the commercial banking system. 
Romania's banking system has total net assets amounting to EURO 
42.919 billion.  With Romania's GDP likely to exceed EURO 100 
billion in 2006, experts predict continued strong growth in the 
banking and credit sector to be led by Western banking interests. 
 
¶3. (U) Romania's banking sector consists of several large banks that 
control the vast majority of the banking business and numerous 
smaller banks that take up niche markets or are struggling to stay 
afloat in a period of increased competition.  The following list is 
a survey of the banks in Romania and their relative positions in the 
market. 
 
Banking Sector Census 
--------------------- 
¶4.  (U) The Romanian Commercial Bank (BCR) is the largest bank in 
Romania with over EURO 11 billion and a market share of 25.9 
percent.  Austria's Erste Bank purchased the entire state-owned 
package in the bank in 2006, as well as the EBRD and IFC stakes.  In 
addition to the original 62.9 percent stake purchased in BCR, Erste 
Bank has been acquiring shares from the Bank's employees, who owned 
7.1 percent of the Bank prior to privatization.  Five domestic 
investment funds also still own an aggregate 30 percent in BCR. 
Erste Bank has stated its intent to buy them out as well. 
 
¶5. (U) The second largest bank in Romania is BRD Groupe Societe 
Generale, owned by France's Societe Generale.  BRD holds nearly EURO 
7.2 billion in net assets and a 16.7 percent market share.  The EBRD 
has preserved a 5 percent stake in BRD. 
 
¶6. (U) The third largest bank in Romania is Raiffeisen Bank with 
almost Euros 3.6 billion in net assets and a market share of 8.3 
percent.  Austria's Raiffeisen Bank purchased the former state-owned 
Agricultural Bank and buying out minority shareholders, including 
the Romanian-American Enterprise Fund. 
 
 
¶7. (U) Germany's HVB consolidated its position on the market with 
the 2006 acquisition of the Ion Tiriac Bank, now ranking fourth on 
the banking market.  [N.B. Tiriac was German tennis star Boris 
Becker's manager and Romanian tennis star Ilie Nastase's doubles 
partner.]  With a combined EURO 3.57 billion in net assets, HVB 
Tiriac holds 5.7 percent of Romania's market. 
 
¶8. (U) All other banks have market shares of less than five percent. 
 They include the following banks: 
 
-- Cluj-based Banca Transilvania stands in fifth place, with around 
EURO 1.9 billion in net assets and a 4.5 percent share of the 
banking business.  The Bank is managed by former ABN-AMRO Romania 
CEO Robert Rekkers and is listed on the Bucharest Stock Exchange. 
EBRD holds 15 percent of the Bank's capital.  Various other Romanian 
firms, including local investment funds, hold another 21.5 percent 
of the Bank's stock. 
 
-- Greece's Alpha Bank fully owns its namesake, Alpha Bank Romania. 
The Romanian Alpha Bank has nearly EURO 1.9 billion in assets and 
comprises 4.4 percent of the local market. 
 
-- Bancpost is the next largest bank, with net assets standing at 
slightly over EURO 1.87 billion and a market share of 4.3 percent. 
Bancpost is a former state-owned commercial bank privatized in 1999. 
Greece's EFG Eurobank Ergasias has gradually bought out several 
other shareholders in Bancpost, including former minority 
shareholder GE Capital, and now owns 77.6 percent of the bank's 
total stock.  The remaining shares in the bank are divided among 
domestic private investment funds. 
 
-- The lone remaining state-owned bank in Romania is the National 
Savings Bank (CEC).  The GOR has sought to privatize CEC since 2004, 
with two calls for offers to date.  However, the GOR has withdrawn 
the privatization offer on both occasions, claiming that the bids 
were too low.  In December 2006, the GOR rejected the National Bank 
 
BUCHAREST 00000036  002 OF 004 
 
 
of Greece's best binding offer of EURO 560 million for majority 
control.  CEC has net assets worth over EURO 1.7 billion and has a 
4.0 percent market share.  While CEC's asset base is small, it has 
one of the most extensive branch networks in Romania.  The GOR has 
pledged to infuse the bank with up to EURO 500 million in additional 
assets, though some question whether such assistance is consistent 
with European State Aid regulations.  Post will analyze CEC's 
current situation and future status Septel. 
 
-- The Dutch ING Bank Romania follows with over EURO 1.6 billion in 
net assets and a 3.8 percent share. 
 
-- Another Dutch bank, ABN AMRO Romania, follows with net assets 
amounting to slightly over EURO 1.3 billion and a 3.1 percent market 
share. 
 
-- Austria's Volksbank fully controls Volksbank Romania, with net 
assets amounting to slightly over EURO 1.02 billion and a market 
share of 2.4 percent. 
 
-- The National Bank of Greece (which tried unsuccessfully to 
purchase CEC through privatization) has purchased a former private 
domestic bank, Banca Romaneasca, which has net assets amounting to 
EURO 882.5 million and 2.1 percent market share. 
 
-- Citibank Romania is the only major U.S. bank operating in 
Romania.  It has EURO 719.3 million in net assets and a market share 
of 1.7 percent. 
 
-- Italian-owned UniCredito has close to EURO 714 million in net 
assets and a 1.7 percent share of the market.  Unicredito will 
combine its branches with HVB Tiriac following last year's 
international merger. 
 
-- Finansbank Romania is the local operation of the Turkish bank 
with the same name, with net assets in amount to EURO 545 million 
and 1.3 percent market share. 
 
-- Piraeus Bank is the local operation of its Greek namesake.  In 
Romania, Piraeus Bank's net assets amount to EURO 257.9 million and 
has 0.9 percent local market share. 
 
-- Carpatica Bank has a local market share of 0.8 percent with net 
assets of EURO 369 million.  The private bank is based in Sibiu and 
the stock is listed on the Bucharest Stock Exchange.  53.6% of 
Carpatica Bank's fragmented shareholders structure is with Romanian 
individuals, 27.9% with foreign individuals, 13.2% with Romanian 
legal entities and 5.3% with foreign legal entities. 
 
-- Hungary's OTP Bank purchased the former Turkish-owned RO-Bank and 
has net assets in Romania of around EURO 565 million, giving it a 
1.3 percent market share under the OTP Bank Romania name.  OTP 
sought to expand through participation in the CEC privatization, but 
chose not to submit a final bid. 
 
-- Banca Italo-Romena, based in Treviso, Italy, is a 
Romanian-Italian banking joint venture between Italy's Gruppo Veneto 
Banca (92.3 percent shares) and Romania's banking leader BCR (7.7 
percent shares).  Banca Italo-Romena has net assets amounting to 
EURO 376.7 million and a local market share of 0.8 percent. 
 
-- Italian SanPaolo IMI Bank has net assets of nearly EURO 258 
million and 0.6 percent market share.  The Italian bank in 2003 
bought more than 95 percent of the former private domestic West Bank 
based in Arad. 
 
-- Turkish-owned Garanti Bank International has local net assets 
amounting to 174.5 million and a market share of 0.4 percent.  The 
bank is legally based and supervised in the Netherlands. 
 
-- Anglo-Romanian Bank follows with net assets amounting to EURO 
164.6 million and a market share of 0.4 percent.  Anglo-Romanian 
Bank is BCR's international brand with branches in London and 
Frankfurt. 
 
-- Egnatia Bank Romania is the local operation of the Greek bank 
bearing the same name.  Egnatia Bank Romania's net assets amount to 
EURO 162.1 million and a market share of 0.4 percent. 
 
-- Bank Leumi Romania belongs to its Israeli namesake, Leumi Bank. 
In Romania, the bank has net assets amounting to EURO 146.3 million 
and market share of 0.3 percent. 
 
-- Libra Bank has net assets of EURO 115.5 million and a 0.3 percent 
market share.  U.S. investment fund New Century Holding (NCH), an 
off-shore company based in Cyprus, has had full control of Libra 
 
BUCHAREST 00000036  003 OF 004 
 
 
Bank since 2003.  NCH's diverse investment portfolio makes it one of 
the largest U.S. investors in Romania.  The fund owns Libra Bank 
through several non-banking local firms. 
 
-- Emporiki Bank Romania is the local bank owned by its Greek 
namesake, the former "Commercial Bank of Greece".  Emporiki Bank 
Romania has net assets of EURO 99.0 million and a market share of 
0.2 percent. 
 
-- Romanian International Bank (RIB) has net assets of EURO 71.1 
million and a 0.2 percent market share.  RIB is nearly completely 
owned by Amcit Daniel Roberts, owner of Merchants Bank of 
California.  Roberts purchased RIB from the former Turkish bank 
Sumerbank. 
 
-- Blom Bank Egypt is the Romanian branch of the former 
Romanian-Egyptian banking joint venture MISR, based in Cairo.  Blom 
Bank Egypt still is based in Cairo and the Romanian operation 
technically is a branch.  Earlier in 2006, about 99 percent of the 
parent bank was purchased by Blom Bank, which claims to be the 
largest bank in Lebanon.  It is currently the only Arab-owned bank 
in Romania.  Blom Bank Egypt's Romanian branch has net assets of 
EURO 66.6 million and a market share of 0.2 percent. 
 
-- Banca C.R. Firenze Romania has net assets of EURO 66.8 million 
and a market share of 0.2 percent.  Italy's Banca C.R. Firenze 
purchased the majority shares in the former South-Korean owned 
Daewoo Bank Romania. 
 
-- Banca di Roma SpA. Italia owns a Romanian branch. It is the only 
bank with a market share of under .2 percent (it has .1 percent) to 
hold a universal banking license.  Its net assets total EURO 50.3 
million. 
 
Smallest Banks Find Niche 
------------------------- 
¶9. (U) Many other, smaller banks operate in Romania, with most of 
their activities limited to niche markets and customers.  These 
include: 
 
-- ProCredit Bank has net assets of EURO 194.6 million and 0.5 
percent local market share.  The bank, which specializes in 
micro-lending, is fully owned by Germany's ProCredit Holding AG. 
 
-- Mindbank has net assets of EURO 85.5 million and a market share 
of 0.2 percent.  The bank was originally established by the Romanian 
Handicraft Cooperative Union.  In early 2006, the Agricultural Bank 
of Greece purchased 62 percent of Mindbank's total stock, with the 
Union retaining close to 20 percent.  The remaining stock is held by 
minority individual shareholders. 
 
-- Raiffeisen Housing Bank is Austrian-owned Raiffeisen Bank's local 
specialized arm dealing with home and mortgage lending.  It has net 
assets of EURO 62.8 million and a market share of 0.1 percent. 
 
-- Porsche Bank Romania is a full member of Austria's specialized 
car loan Porsche Bank Group, financing the sales of Audi, 
Volkswagen, Seat, Skoda and Porsche cars in Romania.  Porsche Bank 
Romania has net assets of EURO 50.0 million and a market share of 
0.1 percent. 
 
-- HVB Housing Bank is a German-owned specialized bank dealing with 
real estate and mortgage lending.  It currently has net assets of 
EURO 10.2 million and a market share of 0.02 percent. 
 
The Last "Problem Child" is Sold 
-------------------------------- 
¶10. (SBU) Romexterra Bank holds a 0.7 percent market share with net 
assets of EURO 308.6 million. Until recently Romexterra Bank was the 
outlier in the general trend toward clean banking in Romania.  The 
Central Bank considered it the main potential threat to the 
integrity of the Romanian banking system, particularly because of 
the reputation of its owners.  Initially the bank of the Romanian 
natural gas industry, Romexterra gradually fell into the hands of 
the main oil workers' trade union, Petrom and then Petromservice 
controlled by controversial union leader Liviu Luca and his business 
partner, Sorin Ovidiu Vantu.  Vantu is currently under investigation 
and court proceedings for his role in various financial schemes, 
including the fraudulent bankruptcy of the former largest equity 
fund FNI and several extinct commercial banks (BRS, BID, Banca 
Agricola).  He has successfully escaped conviction thus far. 
 
¶11. (SBU) In 2006, Hungary's MKB bank, the country's third largest 
bank (controlled 90 percent by Germany's seventh largest bank - 
Bayerische Landesbank) purchased the Luca/Vantu group's shares in 
Romexterra - 55.2 percent of the bank's total stock.  Romgaz and 
 
BUCHAREST 00000036  004 OF 004 
 
 
Transgaz, the state-owned natural gas productin and transport 
companies, decided not to sell teir minority stake in the bank. 
The new majorityowners of the bank are working to hire new 
personel and change the bank's management, alleviating te concerns 
of the Central Bank's regulators. 
 
Comment 
------- 
¶12. (SBU) If there is one areaof post-communist financial 
management that Romaia has gotten right, it is the cleanup of the 
Roanian banking system.  Romanian authorities' openness to allowing 
western banks to purchase domesticbanking assets and the Romanian 
Central Bank's aggressive efforts to push shady businessmen out of 
the banking business have been important elements of Romania's 
economic transition.  Due to strong Central Bank oversight, Post 
assesses that the money laundering risks in the Romanian banking 
system are low and the overall stability of the banking system is 
high. 
 
¶13. (SBU) Although there will always be the risk of financial 
manipulation and banking fraud, Post believes that Romania's real 
money laundering challenges lie outside the banking system, namely 
with insurance houses, real estate brokerage firms, securities 
exchange houses, foreign exchange houses and casinos.  Post 
recommends continuing consultation with, and assistance to, the 
Central Bank and other regulatory agencies to ensure that Romania 
can meet the challenges of overseeing an increasingly complex 
financial system. 
 
Taplin