Devín banka is the fifth Slovak bank to go under forced administration in the last four years, while a sixth, AG Banka had its licence to operate as a bank removed during the same period.
Slovakia's bank sector, which many domestic and foreign analysts have characterised as weak, poorly governed and burdened by a past of mismanagement and corruption, has recently been lifted by the successful sales of the two largest state banks, Slovenská sporiteľňa and Všeobecná úverová banka. The former was sold to Erste Bank and the latter to Italian IntesaBci.
Consolidation is slowly beginning to creep through the sector, with Investičná a rozvojová banka (IRB) likely to be sold soon, the smallest Slovak bank, Banka Slovakia, also attracting interest, and the state's share in mid-sized bank Poštová banka soon to come under the hammer.
"Devín was the last piece of bad cake in the sector," said Pavol Pop, analyst at Poštová banka.
"There were too many licences given out in too small a market by the central bank years ago. There have been problems with some of the smaller banks and their capital adequacy and basic capital. But there is now a positive trend towards consolidation in the market," he adds.
However, the recent history of the Slovak banking sector reads poorly. While there have been no collapses of the sort seen in the Czech Republic recently, where Investiční a Poštovní banka (IPB) collapsed in June 2000, costing the Czechs almost 95 billion Czech crowns, the fall of some of the smaller Slovak banks has cast a pall over the sector.
Below is a summary of the Slovak banks which have been put under forced administration, or closed, and the reasons behind the NBS's decision in each case.
December 1997: Investičná a rozvojová banka (IRB) goes under forced administration after running into liquidity problems. For a year leading up to the decision, the bank had been in the hands of its majority shareholder, steel firm VSŽ. The bank's management, centred on a group around Alexander Rezeš, majority shareholder of VSŽ, was widely blamed for IRB's financial problems.
The bank came out of forced administration in 1999 after the new Mikuláš Dzurinda coalition raised its basic capital by nearly 6 billion crowns ($120 million).
October 1999: Priemyselná banka (PB) goes under forced administration. A victim of the Russian financial crisis in late summer 1998, the bank had guaranteed loans to three Russian finance houses to the tune of 2.6 billion crowns ($52 million). Other banks stopped trading with PB when they discovered that the bank was unable to cover the loans. The bank limped along for a year as the state tried to prop it up. However, by autumn 1999, it was clear the bank could go on no longer and its property and debts were sold to then-state bank Slovenská sporiteľňa (SLSP) for one crown.
December 1999: AG Banka has its bank licence removed. AG has the unfortunate record of being the only bank not to be offered the chance to solve its financial problems under forced administration. Its loss for 1998 had been 563 million crowns ($11.2 million), and the situation worsened over the following 12 months. AG Banka leaders blamed the NBS's release of details of the bank's troubled situation for a resulting run on the bank when clients turned up en masse to withdraw their money.
April 2000: Slovenská kreditná banka (SKB) goes under forced administration. Again, a poor financial situation at the bank, as minimum reserves were found to be dangerously low, and loans discovered to have been extended to risky or sinking projects, forced the NBS's hand. Originally, though, the bank was only limited in the range of financial operations it could carry out, such as no longer being able to offer loans. However, depositors soon got wind of SKB's problems and started withdrawing their cash. Just a week after the forced administration was imposed, the bank's doors closed. They did not open again.
July 2000: Dopravná banka (DB) is put under forced administration. The central bank said at the time that the bank had failed to turn around growing losses and had not created sufficient provisions to cover classified loans. The administration was imposed just one day after DB board members resigned in frustration over shareholder apathy to a capital raise that could have saved the bank.
1. Sep 2001 at 0:00 | Ed Holt