Bank execs. decimate Riisalu’s idea

Photo: Konstantin Sednev

Tallinn Deputy Mayor Aivar Riisalu’s idea to use city assets to buy a holding in a small commercial bank to secure a license for the Tallinn Cooperative Bank is misguided and would lead to unhealthy competition with the private sector, finds CEO of Versobank Aivo Adamson. Other banks are also reluctant to go along with the plan.

“I see no reason why a bank that is indirectly owned by the state should want that. What are the interests?” Adamson asked. “We already have a considerable state apparatus and too many activities in state hands. Let us now create another state-owned bank? To compete with the private sector? The state is already competing with the private sector in property management services. For what? Because it’s somehow a better owner? A foolish idea!”

Adamson ruled out Versobank taking part in the project.

“Versobank’s goals are set, and we do not plan to alter them. Even in today’s rapidly changing environment. We remain flexible in our business in the sectors and client segments we choose,” he said.

CEO of Bigbank Sven Raba agreed with Adamson.

“Bigbank’s strategy for the coming years does not prescribe mergers or acquisition of holdings in similar financial institutions. As a bank specialized in offering loans, Bigbank does not offer account services etc. which is why our participation in negotiations will likely not be necessary,” Raba said.

Deputy Mayor Riisalu wrote on the pages of Postimees late last year that if the city’s cooperative bank cannot secure a license from the financial watchdog, Tallinn should consider buying a holding in a small Estonian bank.

Riisalu wrote that such a holding would lend a small bank credibility and make it more attractive for international institutions and all manner of supervision. “Because Tallinn’s budget is big enough, and it would be sensible for the capital to have a hand in a bank,” he wrote.

The Financial Supervision Authority refused to process the cooperative bank’s license application last year as the latter failed to produce necessary data and documents despite several requests. Proceedings were terminated.

Head of the financial watchdog Kilvar Kessler said that the bank filed a complaint in administrative court last year, asking the court to declare the authority’s decision not to process the application unlawful. The court is set to hear the complaint in a month’s time.

“The law does not prohibit the Estonian Cooperative Bank from filing a new application, but it would be sensible to conclude the ongoing dispute before that,” Kessler said.

The Financial Supervision Authority has previously pointed out that the name Estonian Cooperative Bank is misleading as it points to an active bank. “We have engaged in dialogue with the bank and told them, among other things, to evaluate their activities. We will consider all aspects as concerns potential applications for a license in the future,” Kessler promised.

The cooperative bank is still operating without a license, issuing business loans on fixed capital and employing nine people. Its main contributor is the city of Tallinn.