Czech Bank Rescue May Prove A Boon: Analysts

On Tuesday the CNB placed Agrobanka a.s. under temporary forced administration after it experienced liquidity problems arising from the failure of Kreditni Banka Plzen a.s. and the investigation of people in the Kreditni case who are also connected to Agrobanka.

But analysts said the move is another badly-needed step in reforming the banking sector -- the CNB has now placed 12 banks under some form of supervision over the past two years, shutting many -- and should speed up overall market reforms. Most of the top Czech banking shares lost slight ground on the Prague Stock Exchange (PSE) in the wake of the central bank move, while Agrobanka shares lost the maximum daily limit of five percent.

The PSE on the whole was also down slightly, falling 3.2 points, or 0.56 percent, to 572.2 at its daily price fixing. Many analysts said that the heart of Agrobanka's problems stem from its dealings with Motoinvest, an investment group shrouded in secrecy that stormed onto the market last year with a series of takeover battles against big institutions.

One official from Motoinvest was indicted last weekend on criminal fraud charges for a debt swap scheme which police said led, in-part, to the failure of Kreditni Banka with losses of nearly 12 billion crowns ($453 million). "I doubt there will be much of an effect on the major banking shares. But it has been long known that Motoinvest was involved with Agrobanka and the market had been expecting some problems," said Jeff Ocenasek of Atlantik Financni Trhy.