Regina Ovesny-Straka is Austrian. She took a degree in economics from Vienna University, and from 1982 to 1994 served at Creditanstalt Bankverein in Vienna. Since 1994 she has been based in Slovakia, until 1999 as the spokesperson and member of the board of Creditanstalt, a.s. Bratislava, and then after 1999, following the fusion of Bank Austria and Creditanstalt, as the chair of the board of Bank Austria Creditanstalt Slovakia. Following Erste Bank's purchase of Slovenská Sporiteľňa in April 2001, she was elected chair of the board of Slovenská Sporiteľňa, a.s. Bratislava, responsible for retail banking, marketing, communications and human resources.
photo: Courtesy of Regina Ovesny-Straka
Regina Ovesny-Straka: Slovenská sporiteľňa became a full-fledged member of the Erste Bank group in January 2001. Since then we have come a long way, in terms of quality and our offer of retail and corporate products, in client service, in company culture, in building our financial group... In some areas we have even managed to develop the fastest among all our sister banks. Last year, for example, we recorded the strongest growth in retail loans in the whole group, up 55% year-on-year. Of course, we take this as an obligation to continue this trend and improve our results in all areas.
Q: SLSP is known mostly as a retail bank. Have you made any inroads into corporate finance?
RO-S: Slovenská sporiteľňa is no longer just a retail bank, but is having an ever greater impact in the corporate sector. We are growing at the fastest rate on the market, as shown also by the fact that last year we lent small and medium-sized companies Sk19.3 billion. The trend is definitely towards strong growth in corporate lending - for the second year in a row it is over 60%. Our main strength is that we can tell our clients very quickly under what conditions we can offer him or her a loan, as the provision of the loan is generally decided directly by our people in the regions.
The growth in lending to small and medium-sized companies has been boosted also by loans for agricultural entities, especially short-term bridging loans for pre-financing agricultural subsidies as well as short-term futures loans backed by warehoused collateral. While in 2003 the total value of such loans was Sk100 million, in 2005 it was close to Sk1 billion.
In the area of corporate loans we plan to capitalize on the strong growth in the real estate market, and we are preparing financing for development projects that are linked to corporate loans and by extension to private home financing.
Our clients include both small businesses and large firms that have met success not only on the domestic market but also abroad. Foreign investors also come to us and find that what we offer, as well as the approach of our experts, is at the level they are used to, thanks to our membership in the Erste Bank group.
Q: Slovakia's pension reform, among other things, has created pension funds that are required to invest part of their capital in this country, meaning that the market will soon see excess liquidity. Are there sufficient investment opportunities in this country to absorb this capital? Could the excess liquidity spark further economic growth by extending financing to projects that otherwise might find it more difficult to secure resources?
RO-S: Pension funds have clearly defined rules saying where they can invest their resources, and already from the nature of the funds that most pension savers are choosing it is clear that most of these resources will be invested into international shares and corporate bonds in firms that already have good access to financing. By investing into international firms with a strong presence in Central Europe, pension savers will be able to participate in the economic growth of the entire region. The excess liquidity could make loans cheaper, but only if it is accompanied by a reduction in rates on financial markets.
Q: What impact will Basel II have on SLSP? Will it change your lending policy?
RO-S: Basel II affects mostly risk management, internal rating systems and loan evaluations. So far it has not had a direct impact on our lending policy. It should lead to greater risk transparency, which only increases the stability and credibility of the bank. Basel II will place much higher demands on information from the side of entrepreneurs, and there will be a stronger connection between their economic results and the rating they are assigned by the bank. Simply put, good clients should pay less for their credit, while clients with low lending credibility or a worse credit history should face higher interest rates to compensate for the greater likelihood that they will not repay their loan to the bank, meaning higher capital demands. Naturally, this will not happen all at once. The process will also depend on market discipline and what the competition does in the area of compliance.
Q: Can you see an end to the real estate financing boom, or is strong demand in this sector likely to continue?
RO-S: Home financing truly saw an enormous boom last year, and at Slovenská sporiteľňa we issued three times more such loans as in 2004. Even the rise in interest rates by the central bank should not worsen conditions for new loans, and demand for new loans should not fall. The unsaturated demand for flats is also contributing to this. The indebtedness of Slovak households is till very low, and fewer than 5% of citizens have some form of housing loan, whether in the form of a classic mortgage or a consumer loan that is secured by real estate, such as our Loan PLUS housing product. What is more, banks are introducing new products to the market and are constantly simplifying the process for securing loans, so getting money for housing is now far simpler and more advantageous than it was in the past.
Q: What challenges does SLSP face in relation to the adoption of the euro in 2009?
RO-S: The implementation of the euro is a challenge for every banker. We want to be a reliable partner for our clients during the introduction of the European common currency as well. We are capable of providing all the necessary information, all they have to do is address our advisors directly in our branches. We are the largest and strongest Slovak bank, so it is natural that we also want to be the leader in offering professional information on the common currencyThe introduction of the euro will also require the adjustment of systems in the bank.
Q: Do you think the timing is right, or is Slovakia in too much of a hurry? Do you anticipate any increase in prices?
RO-S: The timing of our entry to the euro has been planned for a long time and corresponds to the deadline by which Slovakia should fulfill the Maastricht criteria. Most of the new EU member countries want to adopt the euro as soon as possible, but few have economies that meet the criteria. Slovakia is the only country in Central Europe with a real chance of fulfillling the Maastrict criteria and adopting the euro by 2009, meaning that for a few years it would have a large competitive advantage over the rest of the region.
In introducing the new currency it will be important that state organs and public sector institutions prevent any unwarranted price increases. They should also introduce a code of ethics on price stability for corporations.
Q: Many analysts warn that as the price of Slovak labour rise, the country will become less competitive and risks losing some of its investors unless it replaces the low-wage advantage with something else, such as high-tech or innovations. What role can banks play in helping Slovakia deal with these risks?
RO-S: Slovakia's competitive advantage is not just in low labour costs. These costs were far lower a decade ago, but Slovakia was far less attractive for investors then than it is today. The interest of investors was stimulated above all by qualitative changes in the economy, such as the fact that the bank sector today is fully functional and offers services to investors on a level that they are accustomed to from developed economies. It has also helped that legislation has been simplified and the tax rate reduced from the 40% that corporations paid in the 1990s to 19% today. On the other hand, if Slovakia wants to continue to progress, it will have to become more competitive. In the long term this in only possible by improving the business environment, increasing people's qualifications and introducing new technology. Educating employees and introducing technology are difficult to achieve without access to capital. By simplifying access to credit and offering technology leasing we can make it easier for companies to make those essential investments in increasing their competitiveness.