Serbia merges new lender Nova Agrobanka into peer Postanska Stedionica.

By bne IntelliNews October 23, 2012
Serbia's government said it has set the grounds for the merger of newly created state-owned lender Nova Agrobanka into peer Postanska Stedionica via a new law that aims to strengthen the banking system, allowing the transfer of assets and liabilities from a problematic bank to another healthy and stable lender. According to the government this is the most effective solution for the stability and consolidation of the domestic banking sector. The cabinet adopted the financial stability law proposal on Monday, Oct 22, and send it to parliament for an urgent ratification, it said in a statement on its website. The document the transfer of the high quality assets and liabilities of troubled Nova Agrobanka to Postanska Stedionica without endangering the stability of the latter. Postanska Stedionica is taking over these assets since it is the most stable bank on the market and has a wide business network and a strong deposit structure. Via the new law the government is being authorized by the parliament to react fast and efficient when any bank is estimated to be unstable. The finance and economy ministry, the central bank and the Deposit Insurance Agency have prepared this law in cooperation with IMF experts. The statement also said that the government considers the model, according to which Nova Banka was created in May this year by the previous cabinet, as inadequate, not in line with the banking law and unsustainable in the long term. Serb central bank licensed 100% state-owned Nova Agrobanka at end-May after revoking the licence of Agrobanka, which had failed to recover its financial shape even after spending six months under the monetary authority's receivership. Nova Agrobanka was transferred all Agrobanka deposits, as well as part of its obligations. The state has issued three-year bonds worth EUR 85mn in order to get over the ownership of Nova Agrobanka via the Deposit Insurance Agency, while the Agency allocated EUR 5mn as initial capital and further EUR 25mn to secure the new bank's liquidity. In the meantime, Serb police has arrested a dozen of people, including former high-ranking Agrobanka officials, over violating legal and internal regulations and causing nearly EUR 300mn worth of damage to the bankrupt lender.
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