Čtvrtek 28. března 2024, svátek má Soňa
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Lidovky.cz

ČSOB wins Kč 33.3 bln arbitration case against Finance Ministry

  16:16

Favorable arbitration ruling clears the path for ČSOB’s planned IPO

ČSOB převazala padlou IPB v červnu 2000. Celý případ provázejí miliardové žaloby. foto: © ČTKČeská pozice

Československá obchodní banka (ČSOB) announced on Wednesday it has won in a Kč 33.3 billion arbitration case stemming from claims by the Ministry of Finance in 2007 relating to guarantees provided during the takeover of failed bank Investiční a Poštovní banka (IPB). The decision removes a significant stumbling block before a planned initial public offering that may occur in 2011. 

“This was the last big dispute in connection with the takeover of the failing IPB in the year 2000. Judging from our current experience, we can say it was the correct move,” Pavel Kavánek, chairman of the board and general manager of ČSOB, said in a press release.

“This was a legitimate step, which has been confirmed during these past 10 years by all courts and other institutions, including, for example, the European Commission. Now, in many examples abroad, the financial crisis has shown that the bailout process, elected in the case of IPB, is standard and works successfully,” Kavánek said.

ČSOB, which is now part of the Belgium-based banking group KBC, said that the procedure to bailout IPB that was agreed upon in 2000 was in accordance with the law and also helped to eliminate risk in the Czech banking sector. ‘[The] financial crisis has shown that the bailout process, elected in the case of IPB, is standard and works successfully.’

A related claim by ČSOB against the Ministry of Finance in the amount of Kč 1.6 billion with associated costs was also acknowledged through the arbitration award. The minstry has also been ordered by the Arbitration Court of the International Chamber of Commerce in Paris to pay the costs of the arbitration, the bank said.

Based on state guarantees accepted in June 2000 during the IPB bailout process, ČSOB in 2002 transferred the receivable of the former IPB from the former company J.Ring to the Czech Consolidation Agency (ČKA).

In 2005, the ČKA returned this receivable to ČSOB claiming legal defects. ČSOB was forced to return payment to ČKA. This would cause ČSOB to bear the losses caused by “the poor business practices and doubts on behalf of IPB” while ČSOB was not responsible for them, the bank said.

In such a case, the Ministry of Finance committed to pay ČSOB the compensation that the bank would be required to return to ČKA. When the Ministry of Finance refused to fulfill its obligation, according to the ČSOB press release, the bank filed a complaint against it for the payment of Kč 1.6 billion. In June 2007, the Ministry of Finance brought a counter suit against ČSOB for the payment of Kč 33.3 billion. ČSOB was represented by law firm Baker & McKenzie, and the arbitration award is final and binding.

Plans for an IPO

ČSOB has been expected to launch an initial public offering (IPO) for some time. In November 2009 the Financial Times reported that KBC planned to float 40 percent of ČSOB on the capital markets; in April 2010, the Wall Street Journal reported that KBC could raise between €1.2 billion and €3.1 billion with the sale of a minority stake in ČSOB.

For the first nine months of 2010, ČSOB reported a net profit of Kč 10.2 billion, and was the second-largest bank on the Czech market in terms of assets, with Kč 908.4 billion.

Investiční a Poštovní banka (IPB) collapsed in 2000, and is the largest bankruptcy in Czech history, with the loss reaching Kč 67.8 billion. The bank was established in 1993 through the merger of Investiční banka and Poštovní banka. In 1998 the Czech government sold its stake in IPB to Japanese bank Nomura. A series of problems after to the sale led to the eventual collapse of the bank.

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