Financial scandal in Croatia
Reuters Reuters Friday, March 22, 2002
Huge losses by currency dealer shake up bank
ZAGREB, Croatia Croatia on Thursday took control of Rijecka Banka, the country's third-largest bank, after a currency trader ran up losses of nearly $100 million - or three-quarters of the bank's capital - prompting its directors to resign.
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Rijecka's chief dealer, Eduard Nodilo, incurred as much as $98 million in losses through allegedly illicit foreign-exchange trades - not for personal gain, but rather in an apparent bid to cover past losses.
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Rijecka's entire management board stepped down Wednesday, saying new management would contribute to the bank's stabilization, state television reported, adding that the central bank had immediately appointed new members.
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The scandal is unmatched by any post-Communist country's experience and has earned Nodilo a comparison with Nicholas Leeson, the British dealer who brought down Barings Bank in 1995. It follows a similar incident last month at the U.S. unit of Allied Irish Banks PLC, where a trader, John Rusnak, allegedly racked up currency trading losses of $691 million.
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Slavko Linic, the deputy prime minister, blasted KPMG International auditors Wednesday for their oversight of Rijecka Banka, saying they had not adequately reviewed business documents that would have uncovered the trading scheme. Their job is not to take business documents for granted, he said, "but to protect the shareholders."
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KPMG said Wednesday that it had reviewed the bank's 2000 and 2001 results "with due care and in accordance with Croatian legislation and international standards."
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But the authorities in this case have pinned the primary blame for Rijecka's troubles firmly on Nodilo, 50, who is in custody but not charged with any crime.
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Meanwhile, a local court slapped a one-month custody order on Snjezana Podobnik, a back-office clerk who was arrested Wednesday on suspicion of aiding Nodilo, state radio reported.
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The central bank estimates the rescue cost at up to 500 million kuna ($60 million), although it could be lower.
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The government, which may face a steep bill to recapitalize the bank, has began the hunt for a new foreign owner who might buy the bank for a symbolic sum in exchange for raising its capital.
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It will begin a tender this week or next to find a buyer for its the 85 percent holding in the bank. Shares in Rijecka have lost two-thirds of their value since news of the losses broke Wednesday. |
