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Management Strategies

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Bulgarian Bank Modernizes Core Systems

International competition in prospective E.U. country calls for a new core.

With Bulgaria aiming for accession to the European Union (E.U.) in 2007, the country has attracted high levels of foreign direct investment in its financial sector, including the acquisition of Hebros Bank ($300 million in assets) in 2000 by private investment firm Regent Pacific Group (Hong Kong), now known as iRegent.

To lead the bank's modernization effort, Stewart Jack was brought aboard as chief operating officer of Hebros in early 2001. He had formerly been

managing director for the Europe/Middle East/Africa (EMEA) region for Sanchez, a banking software provider acquired this year by Fidelity Information Services (Jacksonville, Fla.), and a consultant at Deloitte & Touche. Jack also holds the title of executive director on the bank's board.

It's an "interestingly diverse job," he says. "For one hour, it might be talking about IT problems, and the next is talking about the outsourcing of security," he adds. "Because it is a cash society, we move immense amounts of money."

Bulgaria's current business climate for bankers is rather different from life behind the Iron Curtain. "In the Eastern Bloc countries, there was virtually no consumer finance," says Jack. "All banking business on the asset side was to corporate entities, and deposits on the liabilities side of the balance sheet were taken from individuals and from corporate clients."

That's all changed with the adoption of Western business practices. "Consumer lending is the name of the game here [now]," says Jack. "It's a very competitive market."

But in order to compete with both local players and the international banks moving into Bulgaria, the bank had to deploy a technology infrastructure at a competitive cost structure.

Hebros Bank was formed from eight different banks in 1993. "When we came in three years ago to look at their systems environment, they were running with four different core banking systems," says Jack. That called for a consolidation. But Jack was careful to keep his new colleagues involved in the process so as to achieve consensus. "If you get the people who are going to implement the system and accept the system to choose it, then they've got no argument," he says.

After whittling down the list of potential core systems vendors to two, the selection committee chose i-flex solutions (Bangalore). "It was a unanimous decision," asserts Jack.

Soft Power

While technology and cost certainly played a role in the vendor selection process, the capabilities of the presales consultants also came into play. "They showed a high degree of patience and a high degree of tolerance," says Jack. "They showed an understanding for the way in which Bulgarian banking was different from whatever else they had come across previously."

Indeed, i-flex had met with success previously in other emerging markets in the EMEA region, and thus was able to extend its expertise to the Bulgarian regulatory environment. "They had the ability and the flexibility to be able to adapt to and accommodate some of the archaic requirements," says Jack.

Drawing on i-flex's experience enabled Hebros Bank to get a head start even as Bulgarian regulations began to converge with those of the rest of the world. "Things are changing rapidly in Bulgaria as they do move towards E.U. accession, and that includes taking on board international accounting standards," says Jack.

Hebros Bank's customers stand to benefit from the core systems migration, which will continue through the end of the summer, according to Jack. "We'll be operating with a centralized database," he says. "The new software will allow our clients to just walk into any branch location anywhere in the country and perform their banking just as though they were in their base branch."

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