Marián Jusko, right, says his team thought Devín could be saved.
Jusko defended an inspection the National Bank of Slovakia (NBS) carried out in Devín banka, a finance house involved in the deblocking of Russian debt, in February 2000. Devín collapsed in August this year.
Following an article in the economic weekly Trend and reports on private Radio Twist it emerged the central bank had discovered Devín had artificially increased its balance, carried out fictional trades and lost money on dubious transactions and credits with Russian companies.
The bank did not adhere to rules commonly applied in financial institutions and had repeatedly breached banking and accounting laws and a number of regulations imposed on finance houses by the NBS.
But instead of acting on its findings to introduce forced administration on Devín the central bank did not take any action.
"At the time when the bank's supervision protocol was published the bank's assets fully covered its liabilities," said Jusko. He added that despite the bank's problems he believed at the time there was a real hope of saving Devín.
The NBS decision ran parallel to the government's attempt to prop up the ailing bank with a massive injection of capital.
"We support Devín banka's revitalisation and we are happy that the unfavourable situation which the bank experienced with regard to the fulfilment of compulsory minimum reserves in the past is improving," said Jusko after the state poured Sk2.5 billion into the bank in August last year as part of an agreement on Russian debt deblocation.
Devín banka collapsed in late August this year amid a scandal over the entry of an new investor. The NBS said Japan Grade One, a financial group which had said it was interested in Devín banka, had colluded with Devín's managers to falsify documents on risk coverage and a promised capital injection.
Its cumulative loss had reached 1.2 billion crowns ($24 million), its basic capital was 1 billion crowns, and three quarters of the loans Devín had given were classified or unrecoverable.
Questions were immediately raised by bank industry leaders and experts over the central bank's governing of the financial sector.
Reports this year from the International Monetary Fund, World Bank and the EU have all been critical of what they say is the weakness of the NBS's bank sector governance. Government economic ministers have also questioned the strength of the NBS's sector supervision and following the media attention called for it to be strengthened.
"It should function more effectively. It is also perhaps because of the fact that for a long time there has not been a vice-governor in charge of this area and I would not rule out that there is a necessity to make some personnel changes in banking supervision," said Deputy Prime Minister for the Economy Ivan Mikloš.
Finance Minister Brigita Schmögnerová said the NBS's banking supervision had not produced "what was expected of it" for a long time.
Since its formation in 1992 Devín had been viewed with suspicion by some other banks. Its capital adequacy was believed to be in minus figures for some time. The NBS's own rules on banks' operations stipulate that it must be 8%. Devín had also been offering clients interest rates at a level at least twice the market average for many years.
The bank was also at the centre of a scandal in 1999 over a tender it won to unblock Russian debt. Many people claimed the tender was not transparent and had been won through alleged links the bank had to the coalition Democratic Left Party (SDĽ). The party still denies any ties to the finance house.
Jusko confirmed November 15 that the NBS had made requests to the attorney general that three investigations be started into activities related to the bank and a further request had been made for the financial police to open up a case. He added that a total of 10 firms were believed to have carried out suspicious transactions with the bank. He refused to name the firms.
26. Nov 2001 at 0:00 | Ed Holt