SIPA arrested 10 people this morning: How the Investment-Development Bank of RS was brought down

Members of the State Investigation and Protection Agency (SIPA) entered the Banking Agency of Republika Srpska and the Investment-Development Bank of RS this morning, Patria reports.

Ten people were arrested on suspicion of committing the criminal offenses of organized crime, money laundering, forgery or destruction of official documents...

How the Investment-Development Bank of RS was brought down

Development banking as we know it in both RS and the Federation of BiH is governed by politics and is regularly unsuccessful. It traditionally supports failed friendly projects or provides money to poor companies run by obedient party cadres.

The Investment-Development Bank of Republika Srpska (IRB) first came to light through a nepotistic loan. 

Dozens of politically unsuitable municipalities (where power is held by the SDS) sought loans from this entity's development bank. While the decision on granting loans to certain municipalities was delayed for months, the IRB completed all procedures and approved a loan of 3 million KM to the company "Fruit Eco" from Gradiška on the same day the application was submitted.

The money was transferred to the account expeditiously. It was then revealed that this company is owned by Igor Dodik, the son of RS Prime Minister Milorad Dodik. 

That's when Dodik's famous statement was heard: "Better he deals with fruit than with drugs."

Politics throws away state money

Even then, the fate of the IR bank could be assumed.   

Political, crony, and nepotistic loans followed in succession. 

The consortium "Delta-Zekstra" also received assistance from the IRB RS in the amount of 15 million marks to pay obligations from the contract for the purchase of the Boska department store in Banja Luka. The RS government, then headed by Dodik, forced the IRB RS to buy bonds of RK Boska worth 15 million KM. The money was supposed to be repaid by the consortium "Delta-Zekstra," represented by Dragan Đurić, Dodik's friend. However, he never fully settled his obligations under the sales contract.

Among Dodik's "affairs," suspected of draining money from the IRB as well, is Andrićgrad. There, the attitude towards state capital was confirmed as an attitude towards Alajbeg's straw, so VAT payment was forgiven, as well as multi-million subsidies from the RS government for this architectural whim of director Emir Kusturica.

There were also some incredible "waste" of this bank's capital. The company "Energolinija," of unknown ownership, received a loan from the IRB RS from a line of funds obtained from the European Bank for Reconstruction and Development (EBRD). That loan amounted to 19.4 million KM. 

The case of the loan for "Energolinija" shows what politics does to state-owned banks.  "Energolinija" requested a loan of 20 million KM, but the loan application was rejected by the then director of IRB RS, Milenko Pavlović, due to the enormous risk exposure of this placement without an intermediary bank that would largely take over collection and guarantees.

The director was dismissed expeditiously, and after his departure, "Energolinija" renewed the loan application, but this time in the amount of 19.4 million KM.

The director of IRB RS, at the IRB credit committee (the so-called small committee), approved 6 million KM, considering that amount appropriate for the risk exposure of this placement.

But the RS government, which owns the IRB, convened and made a decision to approve a loan of 19.4 million KM to Energolinija. So, politics again decided to throw state money into its bottomless pits. 

Private loan for a villa in Belgrade

A third, private type of loan, as a loan to his son, occurred when Dodik bought a villa in Belgrade. As RS Prime Minister, in 2007, he paid 750,000 euros through Pavlović Bank for the purchase of that Belgrade villa. It turned out that he took out the loan only a year later. It is said that his loan was repaid by workers of Pavlović Bank, and that in return, Dodik approved a loan from the IRB for Pavlović.

The Investment-Development Bank of RS is already in serious trouble. There are too many such cases of throwing away state money.  Only some unexpected and highly unlikely massive injection of money into the IRB can save this bank from the scenario of Bobar Bank and Bank of Srpska.

Even two or three ordinary bad loans, like those mentioned, can be fatally vulnerable for such a bank, which can wobble and collapse at any moment, writes Patria.