Erste wants market makers for its Bucharest listing

Erste Bank executives have discussed market makers with Bucharest Stock Exchange (BVB) officials during talks on the Austrian bank’s plan to become listed on BVB. Erste owns 69.11 percent of the largest Romanian commercial bank, Banca Comerciala Romana (BCR), privatized in 2006.

Detailed regulations regarding responsibilities and facilities for market makers will be ready in time, but “it is important to find the candidates,” said BVB sources.

Brokerage institutions qualified to become official market makers are to take responsibility for ensuring a stable market, by selling and buying certain shares at fixed quotations, according to Catalin Mitu, General Manager of brokerage company Iebatrust. When a temporary but significant lack of balance between supply and demand is recorded, the market maker is bound to buy or sell at the fixed quotation he has posted, to restore balance.

“Erste Bank plans to be listed on the Bucharest Stock Exchange in the same conditions as in Vienna and Prague Stock Exchanges, where market makers are a common feature for spot transactions,” Erste Bank spokesman Ionut Stanimir told Business Standard.

Once Erste shares are listed on BVB, the Austrian bank will be interested in having balanced liquidity in Bucharest, Prague and Vienna. The market maker can help by buying or selling Erste shares at any of the above three stock exchanges.

BVB General Manager Stere Farmache said the Central Repository is working on a project for interoperability with counterpart institutions in the EU, so that anyone can buy Erste shares from either of the three stock exchanges. BVB is the main shareholder of the Central Repository, the institution responsible for compensation-reimbursement post transaction operations.

Stanimir confirmed for Business Standard that Erste shares are now available in both Vienna and Prague, and will also be accessible in Bucharest once the bank is listed here. At stake are the remaining 30 percent of BCR shares, currently owned by five financial investment companies (SIF). Erste needs 75 percent of the commercial bank’s shares to make strategic decisions concerning BCR on its own.

Good Erste share liquidity could convince SIFs to accept the conversion of their BCR stock to Erste shares.  Mihai Fercala, Chairman of SIF Transilvania, has not ruled out the possibility that SIFs will agree to this, if the exchange report is satisfying. However, he said that “Erste will never get the package of shares it is missing to reach 75 percent, because the SIFs have made an agreement: either we all sell, or no one sells, and the prices we would charge would be too high.”  Until they receive a good offer, the SIFs are still considering listing BCR on the stock exchange. However, Catalin Mitu believes that the BCR listing would be pointless once Erste comes onto the Bucharest Stock Exchange. Last year, Erste bought 61.88 percent of BCR shares for €3.75 billion from the Romanian state.

In December, the Austrian bank also took over a 7.2 percent package from bank employees, most of whom accepted to trade six BCR shares for one Erste share.  Moreover, BCR employees were encouraged to buy Erste shares at a 20 percent discount, according to business TV channel The Money Channel.