THE STATE assisted the troubled Slovak banking sector in recovering and heading towards sustainable economic growth. However, the European Union, which has recently started to review the whole curing process, might dislike the state's helping hand to the Slovak banks.
The Finance Ministry rejected speculations that the state assistance for restructuring the banking sector was not in line with regulations and stressed even more the importance of healing the country's banks.
"The process [of restructuring the banking sector] was evaluated by significant economic bodies, like the World Bank and the European Commission, as one of the best conducted reforms in candidate countries.
"The revision of state assistance by the European Union is a common procedure," the finance minister's spokesman, Peter Papanek, told The Slovak Spectator.
The recent broad restructuring basically pertained to three major Slovak banks: Slovenská sporiteľňa, Všeobecná úverová banka, and Investičná a rozvojová banka (today's OTP Bank).
Under the government of Vladimír Mečiar between 1994 and 1998, some state banks provided loans to companies on the basis of what many industry insiders and independent analysts dubbed political motivation and/or personal friendships, rather than company viability.
Banks ended up with huge classified and non-performing loans. The Slovak economy, without healthy banks, came to the edge of collapsing.
Between 1999 and 2000 the transformation process started. The government's plan to clean up the banks culminated in transferring the bad credit to special financial bailout 'hospitals' Slovenská konsolidačná and Konsolidačná banka in 2000. Classified loans were of a value of more than Sk100 billion (€2.41 billion).
"Slovak banks received state aid as part of the plan to rescue, restructure, and privatise the banking sector, while meeting the European Union regulations", added Papanek.
The Finance Ministry believes that the European Union will consider the specific situation: the economic transformation of a candidate country.
"The total aid to the Slovak banking sector since 1989 (the Velvet Revolution) represents billions of crowns. We have to see, however, the context of the general transition of Slovakia towards a market economy and the key role that the banks have played in the whole process," emphasised the spokesman.
The ministry thinks it is easy to prove that without first restructuring the banks, it would not have been possible to privatise these institutions.
"Ignoring the banking sector would have had a catastrophic impact on Slovakia's economy. We think that the aid was, from the point of view of European banking and GDP, comparable with other countries.
"Apart from that, the aid was not in the form of direct payments. Rather, it consisted of measures - for example, the transfer of bad debts before the privatisation process so that banks would be attractive for buyers," Papanek explained.
Players of the banking sector themselves consider the restructuring process an engine of further economic growth.
The spokesman of OTP Bank, Norbert Lazar, said: "Compared to neighbouring countries, the banking sector restructuring started quite late, but once it started, it was very dynamic. The most important step was the transfer of bad debts into state bailout agencies.
"After the transfer of bank indicators significantly improved, the state became able to sell healthy banks to foreign strategic investors at advantageous prices."
According to Lazar, banks are today consolidated, and most of them will be able to stand the tough competition on the EU market.
The spokeswoman of Slovenská sporiteľňa, Eva Forraiová-Güttlerová, also appreciated the successfully implemented state cure. But at the same time, she added that further steps are needed, especially in the legislative area, to create a better business environment that is comparable to that of the EU for the banking sector, but also for other sectors.
"In spite of the fact that there were successfully implemented legislative achievements, further changes are needed. The stability of the business environment and better law enforcement are instrumental for the development of the banking sector and the whole economy", she said.
However, the further development of banks is now, after the successful transformation and privatisation processes, mostly in the hands of private players.
Between 1999 and 2003, almost all Slovak banks were privatised or sold to important European banking players. The only bank left is Poštová banka, of which the state has already arranged an international tender to find a strategic investor, but the process has been blocked, according to analysts, by its minority shareholder - home financial consulting firm Istrokapitál.
Almost every privatised bank in the Slovak banking sector has thus already gone through its own "healing" process organised by the new shareholders of the banks that were previously owned by the state.
In the transformation of their newly gained banks, new investors emphasized professionalism, an improved approach in services for clients, segmenting customers on individual, business, and corporate levels, planning an optimal branch structure, and training the personnel.
Changes were also oriented visually or through complete re-branding. They mainly wanted to highlight the association with the new owner or simply to cut any connection to a past of which a bank is not very proud.
