Indications have surfaced that VSŽ Košice, the giant East Slovak Iron works, has acquired 43.7 percent of the Bank for Investment and Development (IRB) and thus has gained a controlling share in the bank. Though the allegations have yet to be proven, a source close to IRB's management said that VSŽ, operating through a few of its web of daughter companies, has successfully purchased the shares. If true, VSŽ's buy would run against a Slovak banking law stating that any company owning more than 15 percent of a bank must receive permission from the National Bank of Slovakia (NBS). VSŽ officials did ask the NBS for permission last month, yet after the alleged acquisitions.
IRB is one of four financial institutions long scheduled to be privatized, along with Slovenská sporiteľňa (The Slovak savings bank), Všeobecná úverová banka (VÚB) and Slovenská poisťovňa (Slovak insurnace company). Prime Minister Vladimír Mečiar stated in January that attractive for many reasonsation of Slovakia's four main financial institutions follows a real time-line or not. It currently has a 14.7 percent share.
Privatization of the big banks VÚB, Slovenská Sporiteľná, and IRB plus the insurance company Slovenská Poisťovňa has not followed the course set by Prime Minister Vladimír Mečiar in January. Mečiar said that the privatization of the four would be completed by the end of February of this year. Time passed and privatization did not happen.
In June the Party of the Democratic Left (SDĽ) submitted an amendment to the Law on Strategic Companies to exclude the four financial institutions from the privatization process until March 1997. This was agreed to by the coalition partners, thus it was passed in parliament.
But Mečiar is not necessarily happy with this solution. Miroslav Stanek, Mečiar's economic advisor said that he believed the privatization of the Slovak banking sector would be completed by September.
Regardless of the political positioning for privatization VSŽ doesn't want to wait for the 35.1 percent of IRB the National Property Fund, which represents the state, has to offer. It can hold more than its 14.7 percent share of IRB if it asks permission from the National Bank of Slovakia (NBS), which it did in the beginning of August. NBS approval is required by law for acquisitions in the bank sector of more than 15 percent.
The other variable is that daughter companies of VSŽ have connections to IRB shares. A source close to IRB management said that, "VSŽ and its satellites are the strongest shareholders of IRB." The most obvious of these "sattelite" companies is ARDS o.c.p. a Košice brokerage firm, that owns 13.4 percent of IRB.
ARDS makes up the initials of (A)lexander (R)ezes, the current minister of telecommunications, _______ (D)rabik, and _____ (S)merek. Rezes and Smerek own a large portion of VSŽ shares.
"ARDS is our contracted partner," said Jozef Marko from the VSŽ press office. "It does do some trading for us. But otherwise it is an independent subject."
Presence felt
It is possible that VSŽ or managers of the steel giant own other companies that have small shares of IRB. A lack of transparency into ownership and their management structure makes it difficult to know for sure. A window into what the make-up of the other IRB shareholders might be came from a shareholders meeting of IRB on August 8.
VSŽ representatives replaced three of the nine members on the board of directors. The changes were pushed through by 52 percent of the shareholders present at the meeting who altogether held 43.7 of the shares of IRB. The FNM with its 35.1 percent had been the official majority IRB shareholder. FNM representatives at the August meeting abstained from the vote concerning the personnel changes.
Some in the Slovak media used this outcome of the shareholders meeting as proof that VSŽ holds more than its 14.7 percent. "The vote indirectly proved that the group around VSŽ controls over 40 percent of the IRB shares,'' wrote the weekly Trend on August 14. If this is proven true than the law requiring permission from the NBS to allow ownership of shares in excess of 15 percent would have been broken.
The lack of transparency apparently effects the NBS also. According to NBS spokesman Jan Onda the national bank will not decide whether or not to grant VSŽ permission to own more than 15 percent until it receives information from the Security Exchange Center (SCP) on the ownership of IRB. "We are waiting for the information from the SCP,'' Onda said. He said that only then could the bank investigate possible relations between the VSŽ and other IRB shareholders.
Regarding any possible connections _____ Palovsky the NBS lawyer on bank supervision said, "We could only speak on a theoretical level," adding that the şşbank had its information, but not precise enough to undertake a decision.''
What makes it even more intriguing is that a source at the NBS said that the NBS would actually be happy if VSŽ owned IRB as opposed to the state, because "our leverage on the private sector is in fact much more effective than our leverage against the government. So, if VSŽ becomes the majority shareholder, IRB could eventually become an okay and healthy bank.''
