The truth about the acquisition of the HAAB by the BLB

Published: 21/12/2009

In reference to the statement by the former Prime Minister of Bavaria, Mr Edmund Stoiber, given to Der Spiegel, and conveyed by the Croatian media, insinuating dishonest conduct on the part of the Croatian National Bank and its Governor, Dr Željko Rohatinski, in the case of the acquisition of Hypo Alpe-Adria-Bank d.d., Zagreb (HAAB) by the Bayerische Landesbank (BLB), Munich in 2007, the CNB considers it necessary to reiterate and further clarify as follows:

The stance of the CNB and Governor Rohatinski presented to the public had not, as suggested by the statement, differed from the one taken during contacts with the German bank. There is no truth in Mr Stoiber's claim that the approval for the acquisition had already been agreed on between the BLB and the CNB at the time when he decided to "play a part" in the case, writing to other Croatian authorities and making a public statement after meeting with the then Prime Minister of Croatia, Ivo Sanader, in Split, on 19 August 2007. The facts and documentation tell a different story.

The first BLB's application for the mandatory CNB's approval to indirectly acquire the HAAB had been submitted to the CNB via the BLB's legal representative on 30 May 2007. After the application had been processed in accordance with the prescribed legal procedure, the CNB Council, which, as the highest central bank body, makes final decisions regarding such applications, discussed the issue on 11 July 2007. Due to the BLB's unacceptable behaviour in the well-known case of Riječka banka, but also because of the explanation accompanying the application, stating that no changes would be implemented to the HAAB's operation, the application was judged unacceptable. In line with the stance taken by the great majority of Council members, the CNB Governor adopted a decision to refuse the application. This was followed by a press release to the public (still available to everyone interested, in the Croatian and English language, at the CNB website, section Communications/Press Releases). The decision was final and irrevocable.

Legal regulations permit the submitter of a refused application to submit another one, which is to be brought in compliance with regulation in force and central bank criteria. This was what the BLB intended to do, when, after the mentioned decision was enacted, it requested a meeting at the CNB with the Governor and some other high CNB officials, which was held on 17 July 2007. The CNB's stance regarding the BLB's application remained unchanged at the meeting, and German bank's representatives were only provided a detailed explanation of the reasons why their acquisition of the HAAB had been refused and of the conditions that had to be fulfilled in the new application in order for it to be taken into consideration. No arrangement was made or agreement reached committing the CNB to issue an approval.

In any case, if the arrangement Mr Edmund Stoiber is referring to had already been made, what would be the point of the political pressure on the CNB, and on Croatia as a whole, that he publicly exerted following the meeting with the former Prime Minister Ivo Sanader, in Split, on 19 August 2007, by issuing a statement which was, in addition to being inappropriate to his function and disrespectful to an independent central bank of a sovereign country, also untrue, that is, by claiming that he was "certain that the CNB would withdraw its veto", and by asserting, according to undenied media reports, that "in a letter sent to the CNB he stressed that such a veto could unnecessarily exacerbate the good relationships between Bavaria and Croatia". No such letter has ever been received by the CNB, but it has been, according to our information, sent to some other important addresses in the country, in an effort to increase the political pressure on the central bank.

Since the pressure on the CNB failed to reach the desired effect, the German bank was left with no other option for the acquisition of the HAAB but to submit a new application, whose content was significantly different from that of the first one. The new BLB's application was received by the CNB on 28 August 2007, and it was preceded by a public apology the BLB made to the depositors of Riječka banka and to the Croatian public for abandoning the bank as soon as it ran into difficulties. All the conditions and requirements imposed by the Croatian central bank were complied with in the new application, including the "cleaning" of the balance sheet, producing a more realistic estimate of contingent losses, infusing an adequate amount of additional capital into the HAAB, changing risk management, strengthening internal controls and implementing central bank guidelines on the prevention of money laundering and terrorist financing.

Based on such content — and not due to political pressures or any "behind-the-scene" agreements allegedly made by the CNB and its Governor — the new BLB' application was approved at the CNB Council session held on 12 September 2007. The public was once again informed in detail of the reasons for the decision.

The fact that the operation of Hypo Alpe-Adria-Bank d.d., Zagreb is now healthier than it used to be and that the bank has remained stable and highly capitalised in the midst of the current global financial crisis, which has brought to light significant problems and losses suffered by its Austrian parent bank and ultimate German owner, BLB, is the best proof that the requirements the CNB had imposed on the BLB and its persistence in demanding that they be fulfilled have been fully justified.