BVB shareholders rejected BRM requests related to the Central Counterparty

The shareholders of the Bucharest Stock Exchange (BVB) yesterday approved the company's financial statements for last year, the method of profit distribution and the budget for this year, but rejected the proposals of the Romanian Commodity Exchange (BRM) regarding the Central Counterparty project, an essential entity for the launch of the derivatives market, which should have been operational for at least three to four years, according to initial estimates.

BRM, which holds 5% of the capital of our capital market operator, requested the presentation by the BVB Board of Directors of a report that would include:

the situation of CCP.RO Bucharest and an explanation of the decisions taken by the BVB representatives within the company, as the leader and guarantor of the project;

the convening of a CCP.RO shareholders' meeting, during which the following would be put to a vote: adopting a transparent procedure regarding the selection of the service provider for the Central Counterparty platform; amending the business plan approved last fall to establish realistic deadlines for launching clearing services; and amending the articles of association of CCP.RO, so that the entity's shareholders are informed at least quarterly about the status and amounts of money spent for the authorization of the Central Counterparty. The BRM also requested the approval of an austerity plan for the next three years, to restore the financial reserves of the Bucharest Stock Exchange, which includes, among other things, reducing the company's management compensation by up to 50%.

• Radu Hanga: "New delays in the authorization of the Central Counterparty, correlated with the cost part, could require, at some point, additional capital from our side"

Radu Hanga, the president of the Bucharest Stock Exchange, pointed out that, according to the current budget of CCP.RO Bucharest, the entity requires annual costs of about five million euros.

"BVB owns 54% of CCP.RO, which means that as long as the Central Counterparty does not produce revenues, the maximum impact we could feel at the level of the Bucharest Stock Exchange is 2.6 - 2.7 million euros (annual note). We do not currently have information related to the additional capital required for the Central Counterparty. Of course, this depends on how the authorization calendar will evolve, so that further delays in the authorization of the Central Counterparty, correlated with the cost (operational note), could require, at some point, additional capital from our side," said Radu Hanga.

• Gabriel Purice: "All the simulations presented by you from an operational point of view are super-optimistic"

Gabriel Purice, the general director of the Romanian Commodity Exchange, pointed out that he expected a point of view on the requested aspects regarding the Central Counterparty from the BVB Board of Directors, but, unfortunately, the answers came from CCP.RO

"We are surprised that there is no assumption from the Board of Directors. Combined with the BVB's intention to change the CCP.RO Board, we come to the conclusion that indeed, at the moment, the BVB Board seems to have no power to influence the activity of CCP.RO", said Gabriel Purice.

According to the BVB annual report, our capital market operator failed in its attempt to revoke the Board of Directors of CCP.RO, led by Adrian Tănase, during a meeting held in March of this year, due to the lack of the minimum quorum of 80%, stipulated in the company's Articles of Association for the adoption of such a decision.

"We propose to consider an amendment to the Articles of Association of CCP.RO, in the sense of reducing the percentage of 80%, which cannot lead the company in a good direction. Conventions say that it would normally be 66%," Gabriel Purice said yesterday.

According to the director of BRM, the financial situation of CCP.RO Bucharest is not good at all at the moment. "We started with a share capital of 16 million euros, it reached 25 million and it took six years. But so far we have only seen promises. In addition, we understand that additional capital would be needed", said Gabriel Purice.

The BRM official added: "All the simulations you presented from an operational point of view are super-optimistic. If we take into account two years, how long it takes for ESMA to approve in the super-optimistic case, we exceed the year 2027. Croatia submitted a similar application and it took five years for approval. These are very difficult procedures and I do not see how ESMA can give the approval in two years. We are surprised by the position of CCP.RO, which assumes no responsibility, no blame, but on the contrary, everything boils down to exogenous causes".

Gabriel Purice also stated that, from the BRM's point of view, the software solution for the Central Counterparty had to be developed locally. "It was much more efficient, much cheaper and it was a fraction of the current costs. There are established companies in Romania that could do this without any problems. We have experience in the energy products sector, we have been operating for five years, and we offered help to the BVB but were refused. Our solution could be adapted very easily, at much lower costs than the current ones," said Gabriel Purice.

• Dan Paul: "The report should not have been prepared by the BVB, but by the financial auditor"

Dan Paul, the president of the Brokers Association, stated that the report requested by the Romanian Stock Exchange on the situation of the Central Counterparty project is mandatory, according to the law.

"This item should not have been included in the agenda. I think the Romanian Commodity Exchange only wanted a report as a shareholder, not to vote on this item. According to the issuers' law, this report is mandatory and I do not understand the recommendation of the Board of Directors for the vote "Against". Law 24 (n.r. 24/2017 - on issuers of financial instruments and market operations) obliges you and the auditors to prepare this report. And the justification that there are trade secrets and that is why you do not prepare the report is a "spell"", said Dan Paul.

The president of the Brokers Association added that the report should not have been prepared by the BVB, but by the auditor. "Maybe the Romanian Commodity Exchange addressed the wrong thing by completing the agenda, but the report should be made by the financial auditor. I know that many of you do not know the procedures and many should not have gone through the authorization, but this is something else," said Paul.

• BVB will not distribute dividends this year

Lion Capital's proposal to amend the Articles of Association of our capital market operator, so that the power to elect the chairman of the board of directors of BVB is transferred from the general meeting of shareholders to the board, was approved with about 57% of the votes cast.

Following yesterday's decisions, the Bucharest Stock Exchange will not distribute dividends from last year's profit of 1.2 million lei, the money will go to legal reserves and retained earnings. Recently, BVB depreciated its 64.9 million lei investment in CCP.RO Bucharest by 13.1 million lei and announced a new depreciation of up to 3.8 million lei in the first quarter of this year. Last December, the management of CCP.RO Bucharest failed to obtain the authorization of the Central Counterparty under the European regulation EMIR 2, so the process was resumed under the EMIR 3 regulation.

At the end of last year, the value of the share capital of CCP.RO Bucharest had reached 118.2 million lei, following several increases, of which the BVB holding represented 54.9%, according to the latest annual report of our capital market operator. Other important shareholders of CCP.RO include OPCOM, with approximately 17%, PPC and Electrica.

The last capital increase took place in the fall of 2024, after, in the spring, Euronext Clearing - the provider of the technological solution - withdrew from the contract with CCP.RO, recommending another provider to continue the project, but under different conditions and at higher costs.