Herbert Stepic Resigns: Tragedy or Farce?

On May 24, Herbert Stepic, Raiffeisen International’s CEO, resigned his post after 2 days of intense debate in the media, and probably within the Raiffeisen organization. On May 22 media had reported that Stepic’s name appeared in the notorious Offshore Leaks databank. During his brief press conference, Stepic explained that he had held 2 offshore holding companies, in Hongkong and in the British Virgin Islands, with the purpose of purchasing 3 150 m2 flats in Singapore, that these investments had been financed with money for which he had paid taxes in Austria. So far so innocent.

Would this alone be reason that the “European Banker of the Year 2006”, who single-handedly had built up Raiffeisen’s Eastern European empire in 17 countries with 60.000 employees, whose activities had been supported by EBRD (which together with the World Bank’s IFC also held small shares in Raiffeisen), and who has earned a lot of credit internationally for stabilizing Eastern Europe’s financial system, both initially after the fall of the Soviet Union, and later during the recent and current financial crisis?

Stepic was not uncontested within the Raiffeisen empire: his dynamic drive to the East, his international reputation, his salary, his position within Raiffeisen – for some of his colleagues this went too far for a very traditional rural cooperative Bank. Stepic had also been in the media for a number of dodgy private deals before, like a large real estate investment in Serbia (financed by a loan from a rival bank), for his high salary (of which he recently paid back 2 mill EUR voluntarily, after a public outcry), for his vast collection of African art, his fascination with travel and motorcycling – in short he did not correspond to the image of the average Raiffeisen banker.

For the countries in which his bank worked, and for him personally, his resignation under duress is tragic. Here goes one of the most successful bankers in EBRD’s region of operations, a not so easy to replace personality who knows the banking scene inside out. But his resignation also shows that the Raiffeisen organization thought his shenanigans were starting to do harm to the organization. This is also what Stepic in his short statement to the press based his resignation on: he was innocent, but thought that further discussions would hurt Raiffeisen.

For the outside world, however, questions remain: why did Raiffeisen not stop his behavior, why did they pay him such a high salary and then asked him to pay part of it back? What is the governance situation in this bank? Why is there no “natural” successor to take over from him?

It may well be that Stepic’s fate is not unique: very hard driving in his job, working very long hours, travelling extensively, he lost the ground and the feeling of what goes and what does not go (notwithstanding the fact that he may have acted within the law). He had to invest his exorbitant salary somewhere and may have used offshore companies to hide this from his own and the state’s authorities.

In Austria, such quick resignations of a public personality are very rare. In this aspect, as in some others, Stepic set a positive example. In other aspects, his lack of humility led to a very steep downfall. Personally, I admired Stepic for his straightforward ways, his farsighted dynamism, his knowhow, when I met him several times during my EBRD tenure. His banking skills will be missed.



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5 responses to “Herbert Stepic Resigns: Tragedy or Farce?

  1. Tomasz Sadlik

    He put into dire straits townsends of Poles with his beloved swiss-francs denominated credits….

  2. Could you please comment on the role of Mr Stepic in the Vienna Initiative?

    • kurtbayer

      In a personal conversation, Stepic claimed to be the originator of the Vienna Initiative I. Inhowfar he influenced the Austrian Ministry of Finance (Thomas Wieser), the EBRD (mainly Piroska Nagy and Erik Berglof) and the IMF (Annemarie Gulde) to institutionalize this initiative, is unknown to me.

  3. Adriatic

    Great article. I wonder if Raiffeisen has the compliance instruments to monitor conflict of interest situations of its senior management.

    • kurtbayer

      Well, a few years ago, on the insistence and urgency of EBRD, they set up a relatively complete compliance structure. Inhowfar this covers potential conflicts-of-interest for top management, I do not know.

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