Privatization as the gateway for the renewed transnationalization of Romanian finance

1 Apr

As the government gears up to privatize some prime cuts of the state-owned goodies (hydropower, copper, rail), London-based clearing operations make their move with Depozitarul Central, apparently as part of the ambitions of the Bucharest Stock of Exchange to burst into the big room of “big boys” like the Warsaw and the Vienna stocks of exchange. In banking and finance, clearing denotes all activities from the time a commitment is made for a transaction until it is settled. Clearing is necessary because the speed of trades is much faster than the cycle time for completing the underlying transaction. In its widest sense clearing involves the management of post-trading, pre-settlement credit exposures, to ensure that trades are settled in accordance with market rules, even if a buyer or seller should become insolvent prior to settlement.

The basic idea behind this event is to shorten the social distance between Bucharest and London-based finance using the privatization of attractive state assets as the golden opportunity. When London is ready to provide clearing and training for the Bucharest exchange, you know that big fish have been detected in the water.

On March 28 FT reported that the London Stock Exchange (no less)

“is exploring ways to help the Bucharest Stock Exchange to build its own clearing operations as Romania gears up for the privatisation of some of its largest state-owned companies.

The collaboration between Monte Titoli, the Italian central securities depository owned by the LSE, and Depozitarul Central is part of a wider venture between the two bourses to establish the working practices of the UK exchange in the emerging eastern European country. The LSE will assist in clearing of BSE traded securities and provide support to the potential creation of a securities clearing house and central counterparty functions. It also marks a further push by the LSE into eastern Europe after a deal last year to provide clearing for the Wiener Börse’s network of exchanges across the region.

The two exchanges will promote a Romanian investment forum to raise awareness in London about the country’s economy, while the LSE will support BSE during investor road shows of potential privatisations of Romanian companies. The LSE will also provide training to BSE staff as well as the country’s central securities depository, national securities commission and government offices.”

As transnational loan-based finance ran out of breath as non-performing loans throughout the region increased to levels seen in other financial crises (graph), it is transnational investment finance that steps into the distressed East European financial games.

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