Romania a banking network puzzle.
Voicu, Andreea Raluca ; Ionescu, Alexandru
1. INTRODUCTION
The regular image of a champion is nothing else but a sportsman
whose efforts allow him to go further or faster, or to sustain
victorious campaigns.
Such principles of competition should stay at the base of economic
relationships among the developed countries and less developed
countries. Each competitor has weaknesses and strong characteristics, so
the intellectual and leadership capacities of being aware about such
aspects finally lead to or make the difference between success and
non-success both on the international and domestic markets.
2. THE HISTORIC EVOLUTION OF FREE ECONOMY
There are some lucky countries those historic evolution toward free
economy covers a time period of hundreds of years, but for the others
that period is no longer than few tens of years or just few years.
Such an example of a non-continuous path on the free market
principles could be considered Romanian economy that has kept going
through economic and political reforms since the 1989's revolution.
The normal expected effects of the last years' reforms
consisted in orientation toward a free market competition, political
democracy, control of inflation, restructuring trends, free social
strakes, and so on.
But there are still areas requiring work to be done because of the
lack of performance or deregulations, all these being underwritten tasks
according to European guide of economic integration.
It is no secret that the structure of Romanian economy is still far
away from a targeted economic performance (e.g. of non-fulfilled tasks:
a commercial surplus on foreign trade, inflation rates below 5-6
percents, total independence of justice).
3. THE BANKING SYSTEM
Under those circumstances, I will talk about a domain of Romanian
economy: the banking system. The banking sector has known till year 2007
a high concentration as there were around 28 authorized banks covering
demand and offer coming from a population around of 22 millions people.
Under such financial conditions the investors used mainly as financing
tools the banks loans.
That trend was sustained by the economic conjuncture on the
Romanian market: higher and higher government expenses, adjusted
commercial balance deficits, domestic falling down of interest rates but
still far higher than European average. Thus it was no doubt that the
banks' portfolio of assets and liabilities could do nothing but to
flourish.
The essence of banks' activity is to make their network to pay
back the investment having been done on each branch, agency, office or
outlets (Ahmad & Hoffman, 2008).
Among the previous banks, there was one the most important:
Romanian Commercial Bank (BCR). It was a stateown company being under
the process of privatization toward a strategic investor as part of the
I.M.F. funding conditions for Romania, but it has been delayed for
several years. Privatization was likely to bring in a strategic partner
or a strong consortium, of which the bank's development should
benefit.
As a first step in this direction a share of 25% of the shareholder
equity was sold toward I.F.C. and E.B.R.D. Its high level management
consisted of one chairman and the four deputy-chairmen followed by the
department managers and deputy-managers.
The bank acted both in the field of corporate business and the
retail markets, offering a wide range of financial products and services
of deposit and lending.
It had continued to be the largest bank in Romania with almost
31.9% market share of banking assets, 28.9% of total customers'
loans, 33.9% of total customers' deposits (or available resources),
but only 17% of all available Romanian customers, meaning that its
portfolio had the characteristics of "golden eggs".
The territorial activity was based on a 280 offices network. The
bank also had several 100% participation in abroad subsidiaries in
countries like Germany, United Kingdom, France, Russia, so on.
The overall number of bank employees was around eleven thousands
related to a market value estimated over USD 1 billion and an ascending
rank for 2007 year, from 397 up to 387 among the most powerful world
banks according to The Banker, being the 4-th among the Central and East
European Banks.
Considered as the second important competitor according to the
criteria of market share and aggressiveness, Raiffeisen Bank SA (former
Banca Agricola SA) was a private operator (RFZ-Romania).
The bank had almost 3500 employees and a network consisting in 210
offices. As it can be noticed, this bank had only one third of BCR
employees' number and a comparable network size.
4. HOW WAS THE BUSINESS CONDUCTED UNDER SUCH PRIVATE OWNERSHIP
CONDITIONS
For example into a BCR branch it could be count up to 30 people,
instead of 15-20 people for RFZ one.
Was it wrong? Yes vs. no--because there were advantages and
disadvantages related to the number of services a branch could offer,
the time of decision, the professionalism of human contact man-to-man,
the IT system performance, customer preferences.
As an example it could be mentioned the card issues: BCR had almost
1,338,461 issued units while RFZ came with only 431,356 units, where the
main influence factor had been the sale forces that according to the
number criteria were in favor of BCR even though the card issuing time
was favorable to RFZ (several days instead of a week).
What I wanted to pinpoint there it was the use of network potential
as strategic tool on retail market: while the BCR preferred mainly the
structure of big-size branches (167 branches) with manager + deputy
manager + financial director + law adviser + heads of division + even
more executive and control employees +/- security, its competitor RFZ
had lower its wages cost by setting up mainly the agencies (132
agencies) having a less complex structure than a branch, but a strong IT
communication channel between agencies and head office.
The decisional decentralization was in favor of RFZ. Another argues
into that direction consisted in the presence of RFZ almost in every
supermarket chains being built around the country capital--Bucharest,
while BCR had only one or two agencies in such business areas.
But that strong points in favor of RFZ were balanced by the fees,
commissions, and selling forces that were in favor of BCR. So that the
clients used to chose their opportunity cost based on three criteria:
ways of being contacted, timing and operating cost.
Under recession business periods their choice was definitely in
favor of the lower operational banking fees (favorable to BCR),
otherwise (in case of economic boom) the choice was oriented toward the
operational timing (favorable to RFZ-Romania).
But the most important aspect it proved to remain the traditional
human contact of doing business, and BCR by its superior number of
employees remained the leader in doing that.
On Romanian market, there should be noticed the third important
operator, by using the criteria of network structure, and that was
Romanian Development Bank (BRD-GSG). Its branch network was smaller than
that of previous two banks, but with a countrywide geographical spread,
its strength was related to the shareholder reputation--Groupe Societte
Generale (France).
In fact, on a Romanian financial market dominated by BCR with a
market share higher than 30%, the competition among the RFZ-Romania and
BRD Groupe Societte Generale was for being ranked "the second in
rank" as operative importance, where BRD showed both a
decisions' decentralization and lower fees.
Another banking operator being very active on Romanian retail
market due to the network structure was Banc Post. Its top position in
issuing debit and credit cards (1,059,150 units--second rank, behind BCR
but in front of RFZ or BRD) was due to a focus on distribution by small
outlets and a reliable IT channel in area of timing on card issue,
although its capitalization was less important than BCR, RFZ or BRD.
Thus that bank has succeeded to overwhelm the competition on the card
market share.
The retail activity was intended to be the base of its activity
(e.g. on December 31-th, this medium size bank had an average number of
issued cards of 6,580 units per outlet/office compared to 4,712 units
per office for BCR or 5,410 units per office for BRD:
5. CONCLUSION
All previous banks were offering full services for corporate and
retail market, each of them with different structure on network
management, but all having as common target the profit and shareholders
wealth (Arkin, 2007).
On Romanian market although the banking sector was under an ongoing
process of European integration and reform, the dominance of network
size remained undeniably the factor that offered the premise of success
in the case of a retail or corporate approach (Bussler, 2007). Until
present days there has been a continuous growth of bank network, the
Romanian banking sector not knowing the shutting down of working
branches on large scale.
Sales forces are focused on human being participations, so the
contacts with customers are done face-to-face. The implementation of
automatic teller machine has still free market niches, e.g. invoices of
utilities, account administrations.
Thus, in this particular perspective, the future impact of E.U.
integration is interesting to be found out.
Especially when the technology and dedicated software platforms
come with a better efficiency than the traditional employee (Andrews et
al., 2007).
The reality shows that the sale forces have and can be allocated
successfully from the back office activities.
6. REFERENCES
Activities of the EU (2008), SCADPlus: A modern policy for SMEs,
http://europa.eu/scadplus Accessed: 2008-03-05.
Ahmad, N. & Hoffman, A. N. (2008), A Framework for Addressing
and Measuring Entrepreneurship, OECD Statistics Working Paper.
Washington D.C.: OECD, p. 10, Available from:
http://www.oecd.org/std/research Accessed: 2008-01-24.
Andrews, T., F. Curbera, H. Dholakia, Y. Goland, J. Klein, F.
Leymann, K. Liu, D. Roller, D. Smith, S. Thatte, I. Trickovic, S.
Weerawarana (2007), Business Process Execution Language for Web
Services, Version 1.1. OASIS.
Arkin, A.: Business Process Modeling Language, San Mateo, CA
(2007), BPMI.org, Proposed Final Draft
Bussler, C. (2007), P2P in B2BI, A paper delivered at the Proc. of
the 35th Hawaii International Conf. on System Sciences (HICSS 2002),
Waikoloa (HI)
Table 1. Card market share
Card/net
Aggregate Issued work
network Card office ATM
Romanian
Commercial 284 1,338,461 4,712 579
Bank (BCR)
Raiffeisen 204 431,356 2,114 358
Bank
Romania (RFZ)
Romanian
Development 177 957,251 5,410 368
Bank (BRD)
Ion Tiriac
Commercial 50 137,161 2,743 125
Bank (BCIT)
Banc Post 161 1,059,150 6,580 451