Hungarys largest financial institution has launched a
stinging attack on the EBRD, accusing the lender of forcing it
to accept a loan at the height of the financial crisis by
leaking details of the deal to the media.
Laszlo Bencsik, CFO of OTP Bank, told Emerging
Markets that the EBRD, which is a minority shareholder in
the Hungarian bank, had demanded onerous terms for its
We felt uneasy about the fact that EBRD communicated
to the Press before we even started to discuss the terms and
conditions of the subordinated loan agreement, he
When they came up with their suggested terms we could
not back off from the deal since the investor community had
already taken it as granted and a no deal would have been
regarded as a negative sign.
In exchange for the credit line, the EBRD demanded OTP sell
it E20m in share capital, which had later rose by an estimated
HUF4 billion - 5billion. If EBRD did not insist on this,
we would not have sold these treasury shares, Bencsik
Earlier this month Sandor Csanyi, the banks chairman,
said the EBRD had hurt its profitability by forcing it to take
up an expensive subordinated loan July last year at 7% over the
euro inter-bank rate.
OTP has to-date not used the loan, but the EBRD has
received a steep upfront fee out of it, a former
senior executive at OTP, who was familiar with the matter, told
The EBRD said that it rejected the claims made
by OTPs management and that it stood ready to work the
bank. As the global financial and economic crisis hit
central and eastern Europe in 2008-2009, EBRD repeatedly stated
its readiness to support systemically important banks in the
region, including OTP, to weather the impact of the
upheaval, a spokesperson said.
In a further sign of the deteriorating relationship between
OTP and the EBRD, which owns 2% of the bank, Bencsik criticised
the multilateral banks decision to oppose a proposed
voting rights cap.
On April 30 shareholders rejected a resolution to limit the
voting right of any group of shareholders to a maximum of 10%,
regardless of their stake. It seems they were thinking
with the mindset of a short term financial investor - like a
hedge fund, said Bencsik.
The EBRD spokesperson said: EBRD has been seeking to
uphold the principles of good corporate governance and has been
particularly sensitive to limitation of shareholder
On the wider economy, Bencsik said poor credit growth in
Hungary was due to reduced loan demand from credit-worthy
borrowers rather than liquidity costs.