Bozidar Ristic, General Counsel, Legal Division Manager at AIK Banka, talks to CEE In-House Matters about how the COVID-19 pandemic has affected his work and how it temporarily slowed down a storm of litigation proceedings against the banks in Serbia – a storm due to return.
CEEIHM: To start, please tell us a few words about your career leading up to your current role with AIK Banka.
Bozidar: After getting my degree from the University of Law and after practicing in a local Law office, I had to choose between two paths for my future career: to open a law firm or to become an in-house lawyer. I chose the second option. However, back then, it was difficult to find a job as an in-house lawyer. That is why I’ve accepted the position in an export-import company as an agent for selling equipment for the textile industry representing Italian companies on the Yugoslav market. This period of my career was more than useful, having in mind my future work. During the period when export-import was canceled in the country, I was forced to find new a job.
And so, I went back to my original profession. I started my new career in the legal department of the first private bank in Serbia at that time. My previous experience helped me understand the banking business, domestic and international payments, guarantees, LCs, securities, etc. Knowing transactions and understanding the economy was a good base for an in-house lawyer in a bank.
Working as an in-house lawyer in the bank was quite challenging, dynamic, and interesting. Different law fields had to be covered, a fast response was always needed, and protecting the bank’s interest was always my top priority.
Being a manager, no matter in which profession, is a very responsible position. And, in my view, a manager needs to develop quite a few skills such as management capabilities, knowing how and when to make the right decisions, being transparent, being always open for new ideas, using brainstorming in order to direct performance, hearing both bad and good news, and always being there to give advice to associates – when it is needed and when they ask for it. During all my career I have tried to live up to all of these, and I hope I have succeeded in it.
I was a manager of the Legal Department in Alpha Bank in Belgrade, and when AIK Bank purchased Alpha Bank in Serbia I became a member of the AIK Bank team, first as a legal counsel, and later as a manager. Working for a totally domestic bank as opposed to a bank belonging to the wider banking group with western capital, was quite different, and, in my opinion, working for a wider banking group is always better.
CEEIHM: Looking back at that transition from a purely domestic bank, in what way has the organization evolved since that makes you feel that working for a larger group is better?
Bozidar: From my perspective, it is “better” in that it is more convenient. Being a member of the larger banking group means that you, as a member, may use the experience, support, knowledge, and ideas from the group. The internal system and organization are in constant development in order to achieve success in the market. When you are on your own, you have to achieve all of these and end up putting in more effort, energy, and time than as a member of the group. And of course, whenever you start a new project, there is a fear of "the new" because that new was not already tried and tested, whereas, when you are a part of a group, there are plenty of past experiences you can point to.
CEEIHM: How would a "regular day in the office" look like for you as the General Counsel, Legal Division Manager at AIK Banka?
Bozidar: AIK Banka is a fully Serbian bank, and its prospects and targets are quite different in comparison with other banks that belong to a wider banking group. That is why it is very important to be fast and organized to give support to the core business (both corporate and retail), back office, and other departments (procurement, IT, payments, etc.). Then after the merger of the two Banks (Alpha and AIK) there were more court cases (litigation proceedings) that had to be handled, and, finally, corporate governance also had to be covered. As the manager responsible for providing adequate legal support to the organization, I have to control all these processes within our department, organize daily priorities, and participate in meetings – both internal and external. I am also the Chairman of the Legal Committee of the Bank Association of Serbia.
To sum up, AIK Bank in comparison with other banks in Serbia is not that big of a bank, and because of that, it has quite a challenging working environment because fewer employees end up covering more tasks.
CEEIHM: And how has this year been different for you?
Bozidar: It has been quite a different year for sure. It has brought us so many different challenges and I cannot say that we were prepared for it all. Then again we have ample experience in dealings with crises.
There is no doubt that COVID-19 has stressed, like never before, the business economy. But while the scale of this economic crisis is new, the feeling of uncertainty is something we have all been experiencing in the past years.
This pandemic brought new risks beyond what we already were used to handling, and we needed to adjust to the situation. Since the explosion of the pandemic, the everyday lives of millions of people has changed. The emergency situation has affected many aspects and is shaping a new normal. Working, learning, shopping, and many other basic routines are evolving day by day.
So, we had to re-organize our lives, operations, and social obligations, just like everybody in the world. The Serbian people are adjustable and I love that about us. So, we adjusted: most of the companies organized work from home, with remote working highly influencing the lifestyle of people, social networking was reduced to a minimum, our live meetings were replaced with meetings trough digital channels, only necessary jobs have been performed from the office, and from the beginning, we protected our employees. After spring, when the pandemic calmed down a bit, we returned to the office with 70% of employees, reducing the staff by using holidays, paid leaves, etc. This organization is still in place.
I would say that this pandemic is an opportunity to redefine how banks can stay connected with their customers, to promote trust in technology and digital services, to adapt to the changing life, work, and economy, and to adapt to remote working patterns that have made employees more flexible, giving them more time and freedom to organize work and personal commitments.
CEEIHM: What would you say were the biggest challenges you and your team faced and how did you overcome each?
Bozidar: Even though it has been a difficult time, there’s a bright side for workers: they appreciated the time saved by no longer commuting, the flexibility in work, and the set-up of effective work objectives while working remotely, all allowing a balance between work and family time. This emergency forced people to behave differently.
Both to achieve that flexibility but, primarily to be safe, ever since spring, I organized my team so that most people were working from home, while myself and two of my colleagues were present in the office every day in order to address issues that still require a presence: physical signatures needed on a bunch of documents, registered mail had to be to set, proxies had to be signed, etc. I am the most senior in the department and I believe my highest responsibility right now is to protect my coworkers and take most of the challenges on my shoulders, so I have to be on the front line. And we managed all tasks, we remained well-connected and made our execution of tasks as easy as possible. Today, the situation and the organization is a little bit different because the bank owns one more building in the Belgrade, which due to the COVID-19 situation we use as our second headquarter, and employees are divided into two buildings to respect the rule of 70% presence in the office.
If there is one positive outcome, then it is digitalization, which took place in Serbia earlier than we thought it would. Banks now need to embrace the new normal and go digital. The majority of operations, interactions, and processes are being performed completely online and we need to establish a knowledge base to educate our users about digital banking capabilities.
At the end of the day, we also find that is possible to organize work from home because it brings many benefits including better work-life balance, less commute stress, increased productivity, and performance even if this wasn’t recognized enough by domestic labor laws.
CEEIHM: Beyond the COVID-19-related issues, the banking system has been dealing with its own specific storm in Serbia. What led to this situation and what's the current state of affairs?
Bozidar: I would rather say alongside COVID-19. Yes, there is. COVID-19 has slowed down this storm as courts were closed during the first months of the pandemic, but after that, the storm came back with new strength. As you already know, or maybe you have experienced, every bank in the world, besides interest rates also collects agreed on fees for processing a loan, or a commitment fee, or a different kind of fee. The banks in Serbia do the same, in accordance with valid regulations.
In the beginning, in 2017, clients started initiating litigation proceedings against the banks asking the courts to declare null the articles in the loan agreements related to such fees and oblige the banks to return collected fees with default interest rate.
The courts, which decided in favor of the claimants, initially had two different reasonings:
In the beginning, they claimed that the banks may collect only agreed interest rates, and not fees, interpreting that the earning of a bank may only be the interest rate.
Later, the Supreme Court of Cassation of Serbia took a legal position that collecting a fee is legal, but the banks are obliged to provide proof and state in the contracts what the costs are, on the basis of which they are determined and why they relate to the approved amount.
The misunderstanding between the courts and the banks is that courts, without any special reason and explanation, consider the fee for the service provided equal to the actual costs incurred by the bank in providing the service. As such, according to the courts, a transparent offer to the client has to list the structure of the bank’s costs.
In 2019, at the request of a Hungarian court, the European Court of Justice issued a legal opinion on the same issue that is disputable in Serbia. This court is of the opinion that the requirement that the contractual provision in the loan agreement – such as the provision on fees – should be clear and understandable but that does not mean, at the same time, that all services provided in exchange for the agreed fee in question should be specified and structured.
And this is the key misunderstanding between the courts and the banks: the fee even clearly stipulated in the agreement and well-known in advance is not enough but must be structured and specified in detail according to the current courts’ position on the matter.
Because of this misunderstanding, we had a huge number of cases before Serbian courts, and I do not think it is possible that these will be solved in a reasonable time.
CEEIHM: How do you believe both challenges will evolve in the upcoming months and what steps are you currently taking with your in-house team to support your organization through this?
Bozidar: It is very important to stay safe and healthy for everyone, then everything will be ok. We are trying to stay focused on providing prompt legal support to all units of the bank, to optimize our actions and performance.
Regarding the numerous court cases, we try to give the right defense, adequate evidence, while trying to do cost-cutting as much as possible. The Banks Association of Serbia (BAS) is involved and engaged in helping the banks find the most suitable solution for this issue. The BAS is also devoted to organizing meetings with the Ministry of Justice, the National Bank of Serbia, and other relevant state bodies to find an adequate exit from the current situation. I hope this will be solved in the near future in an adequate manner.
CEEIHM: Gazing through a crystal ball, how do you foresee 2021 will shape up for you and your team? What are the biggest risks and opportunities you are looking to mitigate and take advantage of, respectively?
Bozidar: No matter if we continue to work from home or we come back in the office we project that the biggest risk is that of fee litigation proceedings, because the number of cases is huge, and it grows every day. We hope that, at some point in the future, a common understanding will appear which will lead to a final standpoint.
Regarding opportunities, I hope that digitalization will continue to grow and replace paperwork in most fields, especially in legal issues. There are more legal challenges to cover when it comes to digitalization in the banking sector, from secure communication to securing data and not jeopardize GDPR compliance, to being in line with AML regulation using digital identification, all while offering more digital services.
At the end of the day, I would push for a radical shift to mobilize and virtualize the workforce. Flexible working with the ability to stay connected, while always keeping the customers in the center and by building a strong empathetic relationship with them, would be the best way to summarize my current focus.
This article was published in issue 1.2 of CEE In-House Matters. The full edition is available here in pdf format, here in e-reader format, and here in electronic format.
