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Marián Jusko proposed as next NBS Governor

After six years in office as the governor of the National Bank of Slovakia (NBS), Vladimír Masár will be succeeded by his deputy Marián Jusko by the end of July, Prime Minister Mikuláš Dzurinda announced June 30.
Banking professionals welcomed Jusko as a fitting replacement for Masár. Anton Kozma, assistant director of the EBRD's division for the Czech Republic, Hungary, Slovakia and Croatia, called Jusko "a well-known and respected figure in the banking community. I don't think that his appointment will change the positive international perception of the NBS. I expect that he will continue to pursue the sober financial policy that we expect from the national bank."

After six years in office as the governor of the National Bank of Slovakia (NBS), Vladimír Masár will be succeeded by his deputy Marián Jusko by the end of July, Prime Minister Mikuláš Dzurinda announced June 30.

Banking professionals welcomed Jusko as a fitting replacement for Masár. Anton Kozma, assistant director of the EBRD's division for the Czech Republic, Hungary, Slovakia and Croatia, called Jusko "a well-known and respected figure in the banking community. I don't think that his appointment will change the positive international perception of the NBS. I expect that he will continue to pursue the sober financial policy that we expect from the national bank."

Jusko's nomination brings to an end months of tense speculation about who would succeed Masár to the governorship, one of the most important economic posts in the country. Public figures such as Finance Minister Brigita Schmögnerová and Slovak Chamber of Commerce Director Peter Mihók were touted in the media as possible candidates, although they categorically denied seeking the post.

Jusko has been with the NBS since its foundation in January 1993 after the split of former Czechoslovakia. He was named vice-governor in April 1994. His nomination now has to be approved by parliament during its July session, and then the new governor will be officially named to the office by President Rudolf Schuster.

Why not Masár?

For all that Jusko is a highly respected professional, it is surprising that Masár, with his respected track record, was not even mentioned for another six year term.

Under Masár, the NBS won a reputation in the international business community for prudent and responsible behaviour. Masár kept a tight rein on monetary policy despite the expansionist fiscal policy of the 1994-1998 government of Prime Minister Vladimír Mečiar. In particular, Masár was praised for refusing to yield to political pressure to fund the Mečiar government's runaway spending.

John Stuermer, Associate Director for Global High Yield Research with London-based Bear Stearns International, put it simply. "Under Masár, the National Bank was one of the very few institutions that helped Slovakia survive Mečiar," he said.

Ján Tóth, a senior analyst with the Dutch investment bank ING Barings in Bratislava, said that Masár's NBS had been the best-functioning Slovak state institution over the past few years.

"The NBS was the most compatible institution in relation to foreign institutions of the same kind," he said. "Even in the difficult times under the Mečiar government, the National Bank managed to handle the situation and thanks to its leadership, the country's economy didn't collapse, there were no bankruptcies in the banking sector, nor was there a severe depreciation of the currency," Tóth added.

Even Slovakia's 'iron lady,' as Finance Minister Brigita Schmögnerová is often labelled, had warm words for Masár's performance.

"The NBS under his leadership has done many good things," Schmognerová said in an interview with The Slovak Spectator. "We have to realise that he started building an entirely new institution [in 1993], and that for most of his tenure, the bank was carrying out policies which weren't sufficiently coordinated with the policies of the former government."

So why has Masár - the fearless defender of responsible monetary policy, the founder of a lauded Slovak institution - not been asked to stay on as NBS Governor?

The answer, according to banking sector professionals, may lie in the NBS's mixed track record at home. Matthew Vogel, a senior economist with Emerging Markets Fixed Income Research at Merrill Lynch in London, said that while the NBS had been viewed abroad as successful in controlling inflation, for example, the foreign community was not as familiar with the NBS' activities on the domestic Slovak market.

"Yes, the NBS was a generally respected institution internationally," Vogel said, "but the jury is still out on whether or not the NBS' role in banking supervision was a good one. And that's something which most people internationally couldn't have a very clear picture of."

Vogel, along with many Slovak analysts, said that Masár's reputation had been stained by the NBS' failure to properly supervise state and commercial banks, a failure which led to deep indebtedness at state banks whose top officials were appointed by the Mečiar cabinet.

The most notorious case of mismanagement was that of the Investična a Rozvojová Banka (IRB, the Investment and Development Bank), which was put under a caretaker administration by the NBS in December 1997 when it ran out of money. The NBS, however, failed to watch the bank's performance closely enough, and caretaker administrator Stanislav Krkoška was replaced by the Dzurinda government in February for alleged law violations.

According to World Bank estimates, the IRB has piled up approximately 11 billion Slovak crowns ($250 million) in bad loans, while the other two state banks, SLSP and VÚB, need an infusion of 85 billion crowns to 'clean' their portfolios of bad debt.

"Banking supervision is now a very key issue, because the country is left with three state banks all of which are having severe problems," explained Vogel. "Clearly, it's up to the government to restructure the banks and privatize them, but the NBS could probably have taken a stronger stand in the area of banking supervision."

On the other hand, Vogel stressed, the NBS had been battling many other factors which might have caused the failures in supervision. "Obviously, Slovak bankcruptcy legislation, as in the Czech Republic, is very poor, so to be harder on the banks you'd have to be harder on the institutions which are debtors to the banks. The question is whether the central bank is now equipped to do something to improve the banking supervision system."

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