You may be asked to demonstrate your earning potential before you are issued a debit card at a Slovak bank like VÚB (above).
photo: Ján Svrček
But it is not only foreigners who are being poorly served by Slovak banks. Domestic clients wanting a loan face rates of almost 20%, even though banks rarely pay over 3.5% on client deposits - a discrepancy that banking professionals call "unjustified."
Martin Barto, director of strategy at state bank SLSP, said that services offered by domestic banks have been slow to develop because Slovak customers have neither expected nor demanded better treatment. "Bank services depend on the country's living standards and the demands of the individual clients," he said.
Ján Tóth, a senior analyst at Dutch investment bank ING Barings, added that while domestic clients had not been pushing banks to improve, the virtual absence of serious foreign competition for client share had encouraged Slovak banks to provide poor services.
"Competition for households and small and medium businesses in Slovakia is still very low, and banks are under no serious pressure to improve their services," he said, adding that the situation was not likely to change until the Finance Ministry and the National Bank of Slovakia allowed "world class banks," like Deutsche Bank or Citibank, to enter the Slovak market.
High rates, poor service
At many western banks, clients who open an account do not have to make an initial deposit and are immediately given a debit card free of charge, while some institutions allow customers later to draw on cheques before the bank has verified their validity.
But a straw poll conducted last week by The Slovak Spectator showed that Slovak banks have a long way to go to match the services offered by their western counterparts.
Customers who want to cash a cheque drawn on a western bank must wait over a week at state bank VÚB, between five days and five weeks at Tatra Banka, and from four to six weeks at Československá Obchodná Banka (ČSOB). VÚB applies a service charge of 2%, while Tatra Banka asks for 1% and ČSOB 1% with a 50 crown minimum.
Just to open an account, the minimum initial deposit is 100 crowns at state bank SLSP, 500 crowns at Tatra Banka, 3,000 crowns at VÚB and 5,000 at ČSOB, which also demands a $10,000 minimum deposit for non-permanent residents.
Debit cards cost 125 crowns at Tatra Banka and 150 crowns at SLSP, and can be purchased by any client. At VÚB, however, clients must have at least 15,000 crowns in their accounts to qualify for a card and a 10,000 crown monthly salary. ČSOB, meanwhile requires clients to have 5,000 crowns on deposit, a steady monthly income and at least six months with the bank before they can apply.
Not only do banks operating on the Slovak market charge for transactions normally free in the West, they also do not offer many of the basic services that foreigners expect of banks.
"I went to a branch that was not my own to take out some money," said Ally Robinson, a British native who is now married and living in Slovakia. "They told me, 'this isn't your branch, so get out of here.' It was rather frustrating."
Another ex-pat expressed annoyance that the Tatra Banka branch just off Bratislava's main square was unable to offer a single English or German speaker to assist in a transaction.
In their defence, Slovak bank officials say that they are rapidly improving their services to appeal to the large individual client market.
"We are on the right track, we are on our way to improvement," said Barto, whose SLSP bank has the largest share of individual deposits in the country. "The level of services is still not sufficient compared to the West, but we have made some improvements."
According to Barto, banks have not focused on catering to individual clients in the past, instead opting to concentrate on large corporations. Calling the individual sector "under-developed," he added that SLSP would begin to focus on individuals in the future because "it's always easier to get money from individuals than from corporations. I think that banks will begin to find it a very good investment with low risk."
In an attempt to increase customer service, SLSP has created a ratings system for their private clients, which makes cashing cheques from the West easier and quicker. According to Peter Tejbuš, SLSP's Director for International Payments, the bank has assigned a four-level rating for clients based on expected levels of risk.
"A customer with a one or two rating is an old and trusted customer, and we are willing to extend trust to them," Tejbuš said. "A customer with a four rating is a new, unknown client who has no history with us." SLSP was willing to "take a risk" on a client with a one or two rating, he continued, and cash cheques on the same day. For clients with a three or four rating, however, a wait of six days could be expected.
Better than average?
One bank that claims to stand head and shoulders above the competition is Tatra Banka, owned by the Austrian Reiffeisen group. Tatra Banka has won the Euromoney award for best bank in Slovakia five times in a row since entering the market in 1995, and according to bank spokesperson Adela Laktišová, "is in the forefront of high technology services."
But ING's Tóth said that banks like Tatra Banka were earning huge profits at the moment because they faced virtually no competition. "It's easy to make money when you are competing with VÚB and SLSP," he said. "Medium-sized foreign banks are earning economic rent - the amount of money earned above a reasonable profit - because the competition from state banks is very weak. Here, even if you are an average player, you earn much more than you deserve."
Loans are one way in which banks like Tatra Banka make money. Laktišová said that her bank offered loans of between 50,000 and five million Slovak crowns, with an interest rate of 20%. Only those clients who can offer "a 110% guarantee" received credit, she added.
But with SLSP and VÚB unable to issue new loans because of their cashflow problems, Tóth said, customers had little choice but to go to Tatra Banka and borrow at the rate offered.
"[In order to get a loan], you simply have to go to Tatra Banka," Toth explained. "They have an extremely high differential between the interest rates they charge on loans and pay on deposits - it is unjustifiable. On the other hand,Tatra Banka is just trying to maximise its profits. It is the system, designed by the NBS and the Finance Ministry, which allows such low competition, and which is at fault."