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Government defends action over Devín

Economic ministers have rejected calls from some members of parliament to step down over the collapse of Devín banka.
Speaking after a report on the bank's fall was delivered to parliament November 30, Finance Minister Brigita Schmögnerová and Deputy Prime Minister for the Economy Ivan Mikloš said they had nothing to answer for in the bank's August fall.
Both had been accused by some coalition MPs and the opposition of failing to do enough to stop the bank collapsing, despite knowing more than 18 months before it fell that the finance house was in serious trouble.

Economic ministers have rejected calls from some members of parliament to step down over the collapse of Devín banka.

Speaking after a report on the bank's fall was delivered to parliament November 30, Finance Minister Brigita Schmögnerová and Deputy Prime Minister for the Economy Ivan Mikloš said they had nothing to answer for in the bank's August fall.

Both had been accused by some coalition MPs and the opposition of failing to do enough to stop the bank collapsing, despite knowing more than 18 months before it fell that the finance house was in serious trouble.

"The government gave Devín a chance and it was not the only bank that got such an opportunity. In reality we didn't put a single crown of taxpayers' money into Devín banka. We just gave it a chance to get healthy," said Schmögnerová.

"It was heading for the worst scenario and we wanted to prevent it. According to the material the government had at its disposal there was a chance to resolve the problem," said Mikloš.

Devín banka was put under forced administration in late August this year when it emerged that a planned capital increase by Japanese finance group Japan Grade One was fraudulent. Its cumulative loss had reached Sk1.2 billion ($24 million), its basic capital was Sk1 billion, and three quarters of the loans Devín had given were classified or unrecoverable.

Following the bank's crash it was revealed in mid-November that the central bank had run an internal audit on Devín in February 2000 and discovered Devín had in some cases acted illegally in its bank dealings.

The audit found the bank 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.

Despite the bank's problems the government voted to pour Sk2.5 billion into Devín as part of a condition it continue to recover Soviet era debt owed to Slovakia by Russia.

Some MPs have said Schmognerová and Mikloš, as well as National Bank of Slovakia (NBS) Governor Marián Jusko, must take the blame for the fall of the bank after not acting on the 2000 audit results.

"It's obvious that in the case of Devín banka's collapse the NBS did not act correctly. The government knew about the state of Devín banka and did nothing. Today taxpayers are paying Sk12.5 billion for the whole problem," said Miroslav Maxon of the opposition HZDS party.

Independent MP Peter Tatar said: "One and a half years ago I said it was necessary to make personnel changes across the board in banking supervision at the NBS. The government obviously put political pressure on the NBS, and the governor and vice-governor supported Devín banka. For that the government and the NBS leadership should step down. The government because they insisted, and the NBS because they did not object."

Devín banka since the formation of the current government has had close ties to the ruling coalition Democratic Left party (SDĽ), and has been involved in several scandals involving SDĽ officials.

Jusko defended the central bank and government decisions last year to try to keep the bank afloat. He said he felt he and the cabinet acted properly and that he would take the same course of action now.

"We knew about the bad situation in the bank, but if we strictly applied the principles of capital adequacy we would have had to have imposed forced administration on the entire banking sector," the NBS governor said.

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