Raiffeisen CEO quits over offshore deals

Stepic's abrupt fall from grace removes a larger-than-life figure who made Raiffeisen into central and eastern Europe's second-biggest lender, with 60,000 staff in 17 countries.

Raiffeisen CEO quits over offshore deals

World Bulletin/News Desk

Raiffeisen Bank International Chief Executive Herbert Stepic resigned on Friday in what he called an effort to spare his bank from negative publicity over personal property deals that triggered scrutiny by the lender and regulators.

Stepic, 66, again denied wrongdoing in using front companies in the Caribbean and Asia to buy flats in Singapore in 2006 and 2008 - deals exposed by the Offshore Leaks investigative journalism project - but said he decided to quit out of loyalty to Raiffeisen.

"Given the media reports, I soon became aware that, despite the facts, a debate was taking place that threatened to do massive harm to my company," a drawn-looking Stepic told a news conference packed with journalists and television cameras.

RBI's supervisory board has still to accept Stepic's resignation, but his fate seems sealed, and officials said a formal decision was due within days.

Top members of the board issued a statement calling Stepic's action "a sign of great loyalty to the company. It is great credit to him that he shows with this difficult decision willingness to avert reputational damage."

Stepic says he did not need to notify his bank or regulators about three apartments in Singapore he bought via "project companies" set up with the help of Swiss bank UBS in the British Virgin Islands and Hong Kong.

Those deals are now under investigation by Austria's central bank, its Financial Market Authority (FMA) watchdog and Raiffeisen itself, which has said it will check if his action violated the law or internal guidelines.

Stepic's abrupt fall from grace removes a larger-than-life figure who made Raiffeisen into central and eastern Europe's second-biggest lender, with 60,000 staff in 17 countries.

"As I see it, these affairs were in his private sphere, but we have different sensibilities about these things from what we had 10 or 15 years ago," said Wilhlem Rasinger, president of the Austrian Shareholders' Association.

Shares in Raiffeisen fell as much as 3.6 percent on the news before paring losses to trade down 1.9 percent at 26.49 euros by 1114 GMT.

Nearly 80 percent of the bank is held by Raiffeisen Zentralbank, itself controlled by hundreds of private cooperative banks in Austria.


Guenter Hohberger, central and eastern Europe banks analyst at Erste Group, said Stepic would be hard to replace.

"I don't believe the bank will abandon its strategy - the central and eastern Europe business is its fundamental business," he said. "The question is, who can complete it? Probably there is no-one who has this experience."

Stepic's deputy is Karl Sevelda, 63, who is in charge of corporate clients. He has tended to shun the limelight as much as it was sought by Stepic, who relishes promoting his charitable foundation and showing off his collection of African art.

Former Austrian Finance Minister Josef Proell, who stepped down for health reasons in 2011, also works at Raiffeisen, which is closely aligned with the conservative People's Party, the junior partner in Austria's governing coalition.

Raiffeisen officials appeared taken aback by the prospect of life without Stepic, whose contract runs until the end of 2015. A burly man with a trader's quick instincts and a booming voice, he has very much been the public face of the bank.

The FMA investigated Stepic last year over a reported real estate deal in Serbia financed with a loan from another bank that went sour, but the watchdog's spokesman said it took no action because the investigation showed he had withdrawn from the project.

Stepic, who once called success "the biggest drug there is", again on Friday insisted that the Singapore property deals were above board because he had made the investment with money taxed in Austria and had also paid tax on revenue from a sale.

In a calm but low voice, he said he was proud of what he had accomplished in four decades at Raiffeisen, creating tens of thousands of jobs in the former Communist East and making 800 million euros ($1.03 billion) in profit over the past five years as the financial crisis raged.

Austrian bank executives can in principle invest their own money as they see fit as long as they uphold required standards for orderly business and personal reliability, the FMA says.

But those who use deals to circumvent the law, avoid tax or launder money are subject to review. Whether bankers need to inform employers of deals transacted on their own account depends on banks' internal guidelines, it adds.

Stepic made headlines in April when he returned 2 million euros of his 2012 pay package, saying he felt morally obliged to cut his overly generous compensation.

Güncelleme Tarihi: 24 Mayıs 2013, 15:22