Most of the time, cons are done out of the law and using institutions established for a purpose other than the stated one. However, the credit cooperatives-popular banks, most of which have defaulted on payments, seem a different kind of venture. They were created by law.
Whereas in the SAFI case, let alone Credit Bank, no law was yet in place, and Dacia Felix, Columna, Albina, Bankcoop, BIR and FNI breached the law, popular banks are a different story.
By virtue of the October 1996 founding law, credit cooperatives-popular banks are allowed to effect the same operations as a bank authorised by the banking law – they can lend, borrow and attract deposits from the populace, but they are not supervised by the National Bank and report to no one.
They key to the whole affair is in the magic word, “bank.” By law, the name of credit cooperative was appended with that of popular bank: credit cooperative-popular bank. A gold mine! In a year, companies whose major legal name was spelled out in fine print or omitted sprung up like mushrooms.
Better interest rates, aggressive advertising, sumptuous offices were enough to set the bait. The people came to a bank. Of course. Didn’t the sign read “popular bank”? It’s got to be a bank, just like BCR, BRD, BancPost and the others, but for everyone, for the modest folks, for the retired and low-revenue lot.
This is where the big trouble is. Such shady deals strike the weak, those without information and power. Who then come to the state for answers. Which is wrong, but right. Wrong, because the state should not cover the private damages of deponents who took a risk, but right because without the tacit protection of the state, such institutions would not have existed in the first place.
How did the National Bank accept the proliferation of these cooperatives that called themselves banks without being such? Because it has no legislative initiative, the answer came over time. Parliament had to amend the law. This time it’s right, but wrong. Wrong, because the NBR specialists must have seen it coming.
And the proof that authorities did have their suspicions is that last July, a government ordinance banned the establishment of new credit cooperatives, and the Office for the Supervision of Insurance and Reinsurance limited the insurance of credit and financial risk, which one of these cooperatives pulled out every time they were asked about the safety of people’s money.
Could the credit cooperatives ever attract hundreds of thousands of customers and hundreds of billions of lei in deposits had their name not included the word “bank”? Unlikely. It is almost incredible how a word can cause damage of this magnitude, but it s true.
Unfortunately, however, and paradoxically, the string of bankruptcies in the mainstream, regulated, banking system is so vast that it weakens this argumentation. Deponents might ask: And what good would it be if the NBR did supervise them? It wouldn’t make a difference, they would answer: the others have done just as badly.
Crashes in the last year have driven people to exasperation. Even the informed customers are afraid of losing money, afraid that their deposit is not safe. And how could it be otherwise, when the law itself creates such e(ho)rrors of financial nature, such invitations to swindles.