The summer of 2014 was a hard one for the Bulgarian banking system, as two local banks became the target of liquidity attacks. Fibank, one of the victims, received liquidity back-up with the approval of the European Commission, and began the implementation of a strict plan for restructuring. Since June 2015, the Finn Jyrki Koskelo, an independent member of Fibank's Supervisory Board, has been one of the forces behind the restructuring process. Several month later, he is happy to say that the bank has done better than the projections had showed.
Jyrki Koskelo has a long experience in the sector. Between 1984 and 2010, he worked in the International Finance Corporation of the World Bank, and has been involved in the IFC's investment strategy, policies and practices towards a number of industries in Central and Eastern Europe, Africa and Latin America. He knows Bulgaria from previous assignments, and is interested in the country's future and history.
How did you start working with Fibank?
After I left the IFC, I became what I call a professional board member or professional adviser, dealing with situations that I know from my experience: supporting an emerging country, an emerging company or an emerging bank. Fibank has engaged the IFC as a corporate governance advisory since 2010, aiming to consistently improve the governance and the bank. And then the bank came to a juncture when it needed independent board members. I applied and I was enrolled, because I can provide an outside view, independence, and expertise. My presence here is a part of a consistent and transparent plan by the bank's owners to find people that could best fit in the needs of the bank.
Did you know Fibank before your arrival in Bulgaria?
No. I had never dealt with Fibank. If I had been, then I wouldn't be independent. But when I was in the IFC, I used to actually do investments in Bulgaria. We funded hotels, industrial complexes, banks.
What do you think on Bulgaria's banking system?
Today banking is transforming itself into something different. This happens not only in Bulgaria, but in most of the world. When Lehman Brothers collapsed, in 2008, we all went into recession. Banking has not been the same since then. We came up with the regulatory framework, we are trying to prevent banks from going bankrupt. We have tried to come up with methods to support the banking system, we realised how important it is to have stability. The European Central Bank keeps on launching programmes that try to bring liquidity to the different countries. What makes it interesting for me and actually what was part of the reasons for me to apply with Fibank, is what might happen in the banking sector in the region. What has happened in Greece, for example, might have an impact on Bulgaria. I think that the current governor of the central bank is doing a fantastic job. His job is not easy and it won't be easy in the future. So our responsibility is to try and make sure that every bank will stay on the right path. These challenges are present not only in Bulgaria. They exist also in the Balkans, because of the Greek banks, and also in Europe.
Is Bulgaria's banking system stable?
Right now it is as stable as it can be. It has been handled prudently. But there are forces that are beyond Bulgaria that the Central Bank is fully aware of. It is looking at ways to deal with them. The whole European banking system is now going through stress tests, a process that has to ensure that every bank is doing the right thing. In Bulgaria, this is scheduled for the first half of 2016. So, Bulgaria's banking system is neither better nor worse than those of the other European countries. But Bulgaria is definitely doing a good job, and the Bulgarians should give themselves credit for it.
What is the restructuring of Fibank status progress?
Liquidity attacks or runs on banks happen from time to time all around the world. And when a run on a bank happens, the financial market always overreacts. It is irrelevant if the banks have or don't have actual problems – what is important is that after the attack they need liquidity. I think that the case with Fibank was managed excellently by the EU and the central bank. They provided the liquidity, they stabilised the situation, and now the bank has done much better than they had projected. Fibank has already repaid a total of 775 million leva, including 25 million leva in interest, of the liquidity support of 1.2 billion leva received in June 2014. The bank prepaid 150 million leva of the amount due for 2016.
The bank is rigorously implementing this plan approved by the European Commission, with Bain & Company appointed as an independent qualified monitoring trustee. The third quarter report shows a liquidity ratio of 24.4 percent which means excess liquidity of 600 million leva. The cost of funding of the bank has decreased from 3.3 percent to 2.6 percent.
As for corporate governance, Fibank currently presents a new structure which has been an explicit requirement of the IFC. The structure will make the bank more transparent and effective.
The bank has exceeded its targets. It has paid back, it is implementing the plan. It has demonstrated that it was the victim of a temporary attack.
When is the restructure plan scheduled to finish?
The remaining amount of 450 million leva is due for repayment by the end of May 2016, according to the plan approved by the European Commission. Based on today's liquidity, the bank can actually do this tomorrow. But this would not be prudent, and in my opinion in such a situation you have to manage the bank conservatively and sensibly.
Fibank has done well because Bulgaria has done well. Bulgaria's economy is growing and according to the IMF projections should continue its growth. Which means that if you are a well-run bank, banking should do even better than the economy. Fibank has shown that the projections made when it received liquidity were too conservative – because of the country's growth and because the bank has done the right thing, it is now in a significantly better shape. But because of the whole European banking situation, it is still facing a challenge. There is a lot more to be done and one has to continuously improve the service to the clients.
Did you have the time to see Bulgaria outside Sofia and the banking system?
Unfortunately, my months here have been spent mostly coming to the bank, sitting in an office, getting to know the people and trying to understand. Let's face it, there is a learning curve in this. But during my years in the IFC I used to visit Bulgaria regularly and crisscrossed it, from the coastline, to the mountains. I love Bulgaria's nature and I am looking forward to spend some extra time in the country.
Bulgaria is easily accessible, in Europe and the Balkans, not only if you fly, but also if you drive. And it is different from its neighbours Greece and Turkey. The landscape is different, and I see potential in this. I am a skier, and Bulgarian ski resorts have potential. I have also been quite surprised on the wide spectrum of tourism options that the country can offer. Tourism is one of the world's biggest sectors and in Bulgaria it is yet to develop. I hope that the country will not spoil it with mass tourism. People often focus too much on volume rather than on quality, but I think that one should find the balance. Bulgaria doesn't need zillions of tourists that are very, very thinly priced. It is a country that can sell high-class services. Bulgaria has an opportunity to build a tourism industry based on the country's unique features.
What else in Bulgaria would you recommend to a foreign visitor?
Not the sun and the beaches – there is plenty of these in Spain and other places. I am not saying that the Bulgarian seaside is bad, but it is simply not unique. The attraction for me is Bulgaria's long history, with all the old cultures that used to live here. It is quite interesting. And, of course, the old churches.