At least ten companies, partially or totally owned by the state, held for years tens of millions of euros deposited on account in Prva Banka at interest rates which were less favorable than in the other banks on the market. Due to that, the Bank, the largest shareholder of which is the Prime Minister’s brother Aco Djukanovic, avoided the financial crash. A part of the burden of such an operation of the state-owned companies and the survival of Prva Banka bore the citizens, according to the analysis of MANS Research Center and the daily news “Dan”.
The analysis included two electric companies – Montenegrin Electric Enterprise (EPCG) and Montenegrin Electric Transmission System (CGES) – Railway Infrastructure of Montenegro, Railway Transport of Montenegro, Barska plovidba and Crnogorska plovidba, Montenegro Post and public companies Regional Water Supply, Coastal Zone Management and Monteput.
State-owned companies held the money on accounts in Prva banka mainly as short-term deposits with one year maturity, as well as the cash deposits with a three-month maturity. During 2009, in the most critical period for the Bank’s survival, state-owned companies held on accounts in Prva banka over €100 million, either as a long-term or a short-term deposit.
The financial problems of Prva banka started in 2007. At the end of the following year, the Government granted to Prva banka €44 million of the state aid.
State-owned companies held millions of euros on the accounts in Prva banka for years and got less amount of interest for the cash and short-term deposits than they would get from other banks, especially for a longer period of time.
At the same, time some of those companies, such as EPCG, transferred a part of that burden to their consumers, as the company did not invest the money in the distribution network, which would have reduced the huge technical losses, paid by the consumers through electricity bills. Also, some of the companies, such as railway companies and Crnogorska plovidba, have been operating with losses, so the state has been granting subsidies for years to them.
The key role in the survival of Aco Djukanovic’s bank was played by EPCG, the capital of which capital was increased in 2009 by A2A. EPCG deposited €80 million on its account in Prva banka by the end of the year and in the following years held most of the funds in the bank as the short-term or cash deposits.
Audit Report of Prva banka for 2009 and 2010 are still not available, so there is no precise data on terms under which EPCG deposited the money in the bank. However, the data for the years which follow, show that EPCG agreed the interest rate at its expense, and in favor of the prime minister’s brother.
Audit report of Prva banka for 2011 shows that EPCG deposited €56 million (three deposits in the amount of €25 million, €20 million and €11 million) for the periods of two, three and six months, with the annual interest rate of 2.4 percent and 5.2 percent, which means that most of the funds deposited by EPCG on the account in the bank were short-term deposits, at a lower rate.
Apart from that, in 2011, Prva banka accepted short-term deposits at interest rate of up to 5.4 percent, while in the same year at least two banks offered higher interest rates for the short-term deposits: Hypo Alpe Adria of up to 6.5 percent and Atlas Bank of up to 6 percent. In the same year Prva banka offered 6.2 percent interest rate for the long-term deposits, while Hypo Alpe Adria and Atlas offered higher interest rates – 6.8 percent and 6.5 percent.
The same continued in the following years. According to the 2012 Audit report of Prva banka, EPCG held €48 million as three short-term deposits in Prva banka, in the amount of €28 million and with the one-month maturity, €17.5 million with the six-month maturity and €2.5 million with the 12-month maturity. By the end of 2013 the amount of the money deposited on the account in Prva banka by EPCG was €42.1 million – €14 million deposited with the 12-month maturity, €28 million with the 13-months maturity and €12,000 with the 32-day maturity, at 4.5 percent and 1.5 percent interest rate.
The Audit report of Prva banka at the end of 2014 shows that EPCG held €36.5 million on the account in Prva banka, four deposits in the amount of €84,000, €28 million, €6.5 million and €2 million with the one-month maturity, 366-day maturity, 12-month and 15-month maturity, at interest rates of 0.15 percent, 3.35 percent, 2.65 percent and 3.09 percent respectively.
Finally, at the end of the last year, EPCG deposited €32.5 million in Prva banka – €27 million with the 368-day maturity and 2.3 percent interest rate, €2 million with the 379-day maturity and 3.09 percent interest rate and €3.5 million with the 12-month maturity and 1.8 percent interest rate. It is not clear why EPCG agreed the short-term deposits with the maturity of over a year. According to financial rules, all deposits with over a year maturity are considered long-term deposits, which implies higher interest rates.
Another state-owned company – CGES, which was founded in 2010 and recapitalized in the same year by the Italian company Terna, held €3 million with the interest rate of 5.2 percent on an account in Prva banka. CGES deposited €1 million at the same interest rate in NLB bank.
In 2011, CGES held on a special purpose deposit account in Prva banka €9.2 million, intended for investments. However, the Audit Report of the company for 2012 shows that in the same year the funds were most likely transferred to short-term deposit. The data show that €5.3 million was deposited with the interest rate of 5.2 percent, while €3.7 million was deposited with the interest rate of 1.25 percent. The same year CGES held €11 million as a short-term deposit in Societe Generale Montenegro bank, with the interest rate of 5.6 percent, which was a higher interest rate than the one offered by Prva banka, and €7 million in Erste bank, also with a higher interest rate (5.35 percent).
CGES held on its deposit account in Prva banka millions of euros in 2013 and 2014, while at the end of the previous year, the amount of the short-term deposit in Prva banka was €5 million, with an unknown interest rate, and additional €1.3 million at the interest rate of 0.5 percent.
According to the available data, the Railway Infrastructure of Montenegro held €845,000 in 2009 on its account in Prva Banka, and doubled the amount in 2010. The audit report does not contain interest rates. In the following three years, the company did not report deposits in Prva banka. Nevertheless, the amount of €2.1 million was deposited with the 3-month maturity in 2014. At the end of the last year, the Railway Infrastructure of Montenegro had a short-term deposit of €2.3 million, but the bank and terms are unknown.
On the other hand, the Railway Transport had €721,000 as a short-term deposit in Prva Banka. The Audit Reports for the following years do not contain data on short-term deposits, until 2014 when the Auditor reported €332,000 deposited, but the Deposit Contract was not available.
The last year the accrued loss of the company was €57.1 million, according to the official data.
Pump-priming by public companies in the critical years
The official data show that three public companies – Regional Water Supply, Coastal Zone Management and Monteput invested most of the money in Prva banka in the most critical years for the Bank survival – from 2008 to the end of 2009, when recapitalization of EPCG practically saved the bank.
In 2008, the Regional Water Supply deposited €1.6 million with the three-month maturity and with the interest rate of 5.5 to 7 percent, having additional €7.2 million on the account in Prva banka. It is unknown if any interest for the money was calculated, but even if it was, the amount of the interest could not have been significant, since it was call deposit account.
In 2009, the Regional Water Supply increased the short-term deposits to €9.5 million, under the same terms – with the 3-month maturity and with the interest rate of 5.5 to 7 percent – while on the account in Prva banka it had €4.2 million. The head of the Regional Water Supply at the time was Zoran Bosnjak, a prominent official of the Democratic Party of Socialists and its former MP.
The Regional Water Supply was involved in repayment of the first installment of the loan in the amount of €11 million, which had been granted to Prva banka by the State. According to the Central Bank of Montenegro, this transaction was „problematic“.
After having an insight into RTGS system (real-time gross settlement system), the Central bank identified that the Ministry of Finance made to Prva banka 11 payments in the amount of €1 million to the account of the Regional Water Supply, intended for the regional water supply construction. In the same period, Prva banka made 11 payments of €1 million to the Treasury controlled by the Ministry of Finance. So, Prva banka and the Government practically transferred the debt of Prva banka to another state-owned agency.
Coastal Zone Management played a vital role
Another public company which played a vital role in the survival of Prva banka in 2008 and 2009 was the Coastal Zone Management. The company had €425,000 cash deposit in Prva banka, and tripled the amount to € 1.5 million in the following year. The financial reports of the Coastal Zone Management, managed at the time by a member of the Social Democratic Party, Rajko Barovic, do not show the amount of the agreed interest rate.
When it comes to Monteput, the data of the Central Bank of Montenegro, published by the Network of Investigative Journalists OCCRP (Organized Crime and Corruption Reporting Project) reveal that Monteput had €3 million of deposits on an account in Prva banka in the years of crisis. It is unknown under which terms the funds were deposited, since MANS does not possess Audit Reports of Monteput for that period.
Unknown terms
Data of the Central bank of Montenegro show that Crnogorska plovidba had €7.8 million on an account in Prva banka at the time of the Bank crisis, while Posta had €1 million deposited, under unknown terms.
When it comes to Barska plovidba, the documentation possessed by MANS Investigation Center show that the company had €2 million deposited on its account in Prva banka. In 2010, the Company had €1.8 million, and a year later, by the end of 2012, the amount of deposits was €400,000. The deposits were withdrawn by the end of the following year.
Written by:
Ines Mrdovic
Milica Krgovic
This text is created with the support of the European Union within the project “Zero Tolerance to Corruption”. Network for Affirmation of Non-Governmental Sector – MANS is solely responsible for the contents of this article, and the views taken herein shall not in any case be considered as those of the European Union.
