IN THE END branches of foreign banks operating in Slovakia will continue to be allowed to provide mortgages. The Slovak parliament adopted a revision to the Bank Act, nixing the proposed restriction, on May 15. The decision to cancel a proposed ban to prohibit branches of foreign banks from providing mortgage loans was welcomed by the Slovak Banking Association (SBA) as well as UniCredit Bank Slovakia.
The SBA believes that the original proposed draft legislation was at odds with European law.
“The Slovak Banking Association supports over the long term the idea of the united financial market within the European Union and, thus, it welcomed the change in the stance of the Finance Ministry,” Monika Klobušická, the SBA spokesperson, told The Slovak Spectator.
UniCredit Bank Slovakia, which has plans to merge with its Czech counterpart and create a foreign bank branch, and which, had the original proposal been adopted, would have been unable to offer new mortgages, was also pleased with the decision.
“We appreciate that the Finance Ministry carefully pondered the draft revision ... in order to be in line with the European legislation,” Zuzana Ďuďáková, spokesperson of UniCredit Bank Slovakia told The Slovak Spectator.
The UniCredit group announced in November 2012 an integration project to combine its subsidiaries in the Czech Republic and Slovakia into a single cross-border bank.
The merger, still subject to the approval of the relevant national authorities, is expected to be completed by the end of 2013. It wants to continue to provide mortgage loans after the integration and plans to ask for the necessary licence.
The original plan
In the original proposal, which the Slovak Cabinet adopted in February, if a bank providing mortgages were to transform into a branch of a foreign bank and wind down its operations in Slovakia, resulting in the foreign bank taking on its obligations and claims, it would be unable to carry out specialised mortgage deals.
For branches of foreign banks, this would have meant that they would not have been able to provide traditional mortgages covered by mortgage bonds, as well as state subsidised mortgages with lower rates for young people.
The SBA criticised the draft revision, calling it discriminatory, because it applied only to branches of foreign banks. The NBS, the country’s central bank, explained to The Slovak Spectator that the main reason for proposing the ban was due to the need to secure financial stability.
Another reason lay in the specific character of mortgage deals and the complexity of cross-border legal relations.
Based on consultations with representatives of the European Commission and the European Central Bank, the National Bank of Slovakia prepared an amendment to the draft revision to the Bank Act, leaving out the ban on branches of foreign banks providing mortgage loans in Slovakia, Radko Kuruc, an adviser to the finance minister, told The Slovak Spectator.
NBS spokesperson Petra Pauerová added that the legal arrangement of this issue is not consistent within the EU, pointing to differences in national arrangements for the provision of mortgage loans. A consequence of this is also the fact that foreign banks do not currently provide mortgages via their branches in Slovakia.
The SBA, Klobušická told The Slovak Spectator, understands the objections of the central bank as far as the transformation of banks into foreign bank branches, but it did not regard the original draft revision to be suitable for two reasons: first, the ban is discriminatory and is at odds with the basic rights existing in the EU, and second, the ban would restrict competition on the mortgage market.
The media has speculated that the National Bank of Slovakia pushed the ban into the original draft revision to create a barrier for banks in Slovakia to transform from subsidiaries into branches which are not under the supervision of the central bank.
The Trend weekly wrote that the central bank is afraid that the transformation of a bank into a branch of a foreign parent may have a negative influence on the financial stability of the Slovak banking sector because this would allow capital and liquid assets to transfer into the parent companies.
The ban was removed from the draft revision just prior to parliament’s final vote on the revision.
The revision to the Bank Act, adopted on May 15, prohibits banks from requiring fees for administering loan accounts.
Banks and non-banking financial institutions would be able to require such a fee only if a client wants additional services.
