VSŽ, the east Slovak giant iron and steel works, wants to be the majority owner of the Bank for Investment and Development (IRB) whether or not privatization of the four main financial institutions follows a real time-line or not. It currently has a 14.7 percent share.
Privatization of the big banks, VÚB, Slovenská Sporiťelná, and IRB plus the insurance company Slovenska Postiovňa has not followed the course set by Prime Minister Vladamír Mečiar in January. Mečiar said that the privatization of the four would be completed by the end of February of this year. Time passed and privatization did not happen.
In June the party of the democratic left (SDĽ) submitted an amendment to the Law on Strategic Companies to exclude the four financial institutions from the process of privatization until March 1997. This was agreed to by (Slovak insurnace company). Prime Minister Vladimír Mečiar stated in January that the four banks would be privatized by February. But that did not happen then, and it has not happened now, though Mečiar's economic adviser Miroslav Stanek said he believed banking privatization would be completed by this September.
But VSŽ doesn't want to wait. Though the state owns 35.1 percent of IRB through the Fund for National Property (FNM), VSŽ managers have maneuvered to buy those shares not owned by the state.
VSŽ is on the books with a 14.7 percent ownership of IRB. But many of its huge constellation of daughter companies have connections to IRB shares. Using those subsidiary companies as screens, VSŽ has augmented its share in IRB by snapping up another 29 percent. "VSŽ and its satellites are the strongest shareholders of IRB," a source close to IRB management said.
The most obvious of these subsidaries is ARDS o.c.p., a Košice brokerage firm that owns 13.4 percent of IRB. ARDS is made up from the initials of VSŽ's most pwerful managers: (A)lexander (R)ezeš, the Minister of Transportattion, Telecommunications and Post, Ladislav (D)rabik, and Ján (S)merek, VSŽ's president. Rezeš and Smerek also own a large portion of VSŽ shares.
A VSŽ official denied any clear-cut connection between VSŽ and ARDS. "ARDS is our contracted partner," said Jozef Marko from the VSŽ press office. "It does do some trading for us. But otherwise it is an independent subject."
Another indication that VSŽ and its managers have bought a controlling share in IRB came from the bank's shareholders meeting on August 8. At that meeting, shareholders voted three VSŽ representatives to IRB's nine-member Board of Directors, replacing three others that had served on the board.
Curiously, while the FNM is IRB's official majority owner with 35.1 percent of the bank's shares, FNM representatives abstained from the board of directors vote at the August meeting.
Some in the Slovak media used the outcome of the shareholders meeting as proof that VSŽ holds more than its stated 14.7 percent. "The vote indirectly proved that the group around VSŽ controls over 40 percent of IRB's shares,'' wrote the weekly Trend on August 14. If this is proven, than the law requiring the NBS's permission to own shares in excess of 15 percent would have been broken.
The lack of transparency with IRB's ownership structure has become an issue with NBS officials. According to NBS spokesman Ján Onda, the national bank will not make any ruling on VSŽ's alleged purchases until it receives information from the Security Exchange Center (SCP) on IRB's ownership. "We are waiting for the information from SCP,'' Onda said. He said that only then could the bank investigate possible relations between VSŽ and other IRB shareholders.
Likewise, the NBS's lawyer on bank supervision, František Palovský, remained mum on any possible wide connections between VSŽ and IRB. "We can only speak on a theoretical level," Palovský said, adding that the şş[national] bank has its information, but not precise enough to undertake a decision.''
What makes the whole issue even more intriguing is that another NBS source who requested anonymity said that the central bank would actually be happy if VSŽ owned IRB as opposed to the state, because "our leverage on the private sector is in fact much more effective than our leverage against the government. So, if VSŽ becomes the majority shareholder, IRB could eventually become an okay and healthy bank.''
11. Sep 1996 at 0:00 | Jana Dorotková