The Slovak Antimonopoly Bureau on April 2 said it had started administrative actions against steel producer VSŽ for allegedly covering up the extent of its control of the Slovak commercial bank Investičná a Rozvojová Banka (IRB). "The Antimopoly Bureau on March 31 started action against VSŽ based on allegations that it did not report its concentration [of ownership in IRB]," said Imrich Zwieb, the bureau's official leading the investigation.
"(The inspection's) aim will be to disclose whether VSŽ and stockbroker ARDS did not act in concert, and if this was the case, why it did not meet the legal requirement to report such concentration of ownership to the bureau," he added. VSŽ officially holds 14.7 percent of the bank, but took control of one-third of the seats on IRB's supervisory board after it worked in an alliance with many of the bank's other shareholders to force management changes.
The central bank has accused ARDS of acting in concert with VSŽ, effectively allowing the steel producer to control more than the allowed 15 percent in the bank. Slovak banking law stipulates that the central bank must approve any holdings over 15 percent in a bank.
Last August, VSŽ asked for central bank permission to increase its stake in IRB to over 20 percent but the central bank rejected the request saying "VSŽ did not present its own plan on participation in the bank's restructuring process. VSŽ appealed against the National Bank of Slovakia (NBS) ruling, and the result of the appeal process has not yet been made public.
Zwieb said the investigation is linked with VSŽ's long-standing attempt to take control over the bank. He also would not say what legal consequences the inspection could impose. "It has just started and we have to find out what exactly happened in the bank," he said.
According to the latest figures from the central securities register (SCP), ARDS no longer holds any IRB shares after it obeyed an NBS rule to reduce its holdings of 14.3 percent.
The NBS has attacked the changes to the IRB supervisory board, saying they were pursued through an "illegal ownership position." VSŽ is a major client of IRB accounting for an estimated 1.5 percent of the bank's total loan portfolio. The company accounts for 16 percent of Slovakia's industrial output with its steel works alone and has some 100 subsidiaries, limited companies.
VSŽ officials have said the firm needs to have close ties to banks to ensure the financing of its ambitious expansion plans, but many analysts have warned that the move could allow VSZ too much control over them.
