Financial system of the Slovak Republic

The financial system of the Slovak Republic encompasses a set of financial and regulatory entities, their mutual relationships and their relationships with other bodies and institutions, primarily those of the state. From an economic perspective, every financial system is comprised of the following main components: financial markets, financial institutions, financial instruments, financial transactions, and creditors and debtors.

The system of financial authorities is comprised of:

1. Banking authorities,
2. State financial administrative authorities,
3. Specialized financial authorities and institutions.

1. Banking institutions

The Slovak banking sector has undergone perhaps the most dynamic processes of internal reorganization of any Slovak sector in the last twenty years. The goal of these processes was to create a standardized competitive environment in the banking product market and the operation of a financial market on market principles. Further substantial changes developed with the entry into the European Union and the subsequent adoption of the Euro on 1st January 2009.

In general terms, banking authorities primarily fulfil roles related to clearing, savings, lending and borrowing, and facilitating foreign exchange.

The banking institutions of the Slovak Republic include, among others:

1. National Bank of the Slovakia (NBS),
2. Commercial banks,
3. Export-Import Bank of the Slovak Republic (EXIMBANKA SR).

1. National Bank of Slovakia (NBS)

NBS is the independent central bank of Slovakia which was established through Law No. 566/1992 Coll. On the National Bank of Slovakia as Amended. NBS is a participant in the European System of Central Banks and also, since 1st January 2009, of Eurosystem. In the field of the financial market, the National Bank of Slovakia contributes to the stability of the financial system as a whole and to the safe and sound functioning of the financial market in order to maintain the credibility of the financial market, to protect clients and to ensure adherence to competition regulation.

In cooperation with the European Central Bank and other central banks of the Eurozone, the primary objective of the NBS is to maintain price stability within the Eurozone. The role of the Slovak National Bank in Eurosystem is to contribute to ensuring the following:

• Monetary policy,
• Foreign exchange and foreign exchange reserves,
• Issue of Euro notes and coins,
• Payment transactions,
• Collection and compilation of statistics,
• International cooperation,
• Mutual cooperation and support between central banks,
• Financial stability within the Eurozone.

The remit of NBS also includes:

• aiding the smooth operation of payment systems and clearing systems, managing, coordinating and securing the circulation, payment and clearing of payment data, and ensuring the fluidity and cost-effectiveness of the transaction system,
• maintaining foreign exchange reserves, conducting foreign exchange operations in accordance with the specific rules applicable to the operation of Eurosystem,
• supervising the financial market, i.e. overseeing banks, foreign bank branches, securities dealers, investment services brokers, stock exchanges, asset management companies, mutual funds and collective investment undertakings, insurance companies, reinsurance companies, pension management companies, pension funds, supplementary pension companies and other supervised entities within the Slovak financial market.

1. Commercial banks

There are currently 27 commercial banks operating in the Slovak Republic which are either have their headquarters in Slovakia or which are branches of foreign banks located in Slovakia.

Matters relating to the establishment, organization, management, business and bankruptcy of banks with headquarters in Slovakia and of the operation of foreign-owned banks in Slovakia are fully regulated by Law No. 483/2001 Coll. On Banking and Amendments to Certain Laws as Amended (hereinafter referred to as ‘the Banking Act’).

This Act defines a Bank as a legal entity established in the territory of the Slovak Republic as a joint stock company which accepts deposits and provides credit facilities. A branch of a foreign-owned bank is defined as an organizational unit of a foreign-owned bank which is located on Slovak territory and which is directly involved in accepting deposits and providing credit facilities. In order for a legal entity to perform these activities, possession of a banking licence is a mandatory requirement.

The Banking Act states that a bank license can be granted to establish a bank or to establish a branch of a foreign-owned bank and to carry out banking activities by that bank or a branch of a foreign bank to the extent which is defined in the licence.

According to the terms of the Banking Act, a Bank may perform other activities beyond the scope of accepting deposits and offering credit facilities if such permission is listed in the banking licence. These additional activities include:

• Provision of payment and clearing services,
• Provision of investment services, investment activities and associated services, and investment in securities on private accounts,
• Trading on private accounts with money market financial instruments in Euros and in foreign currencies, including gold as a market commodity, or with stock market financial instruments in Euros or in foreign currencies, with precious metal coins and commemorative coins and banknotes, collectors’ coins and banknotes and collectors’ sets of coins and banknotes,
• Client asset management and provision of related advice,
• Financial leasing,
• Provision of guarantees, provision and validation of letters of credit,
• Provision of business consultancy services,
• Issuing of securities, participation in the issue of securities and provision of associated services,
• Finance brokering,
• Provision of safety deposit services,
• Rental of safety deposit boxes,
• Provision of banking information.

1. Export-Import Bank of the Slovak Republic (EXIMBANKA SR)

EXIMBANKA SR was established by Law No. 80/1997 Coll. On the Export-Import Bank of Slovakia as Amended. This institution has a very specific position in the banking system as it is neither a bank nor an insurance/reinsurance institution, nor was it in fact established for business purposes.

EXIMBANKA SR supports the foreign-trade operations of exporters and importers in order to increase the competitiveness of domestic goods and services and to promote the mutual economic exchange between the Slovak Republic and foreign countries. The following activities are carried out in pursuit of these aims:

• Financing of export credits,
• Financing of import credits,
• Export credit insurance,
• Securing export credits,
• Provision of guarantees,
• Other activities.

2. State financial administration authorities

The authorities of the financial administration of the Slovak Republic include:

1. The Ministry of Finance of the Slovak Republic

• The central government body in the fields of finance, taxes and duties, customs, financial controls, internal and governmental audits,
• Provides policy formation and implementation in the fields of finance, taxes and duties, customs, financial controls, internal and governmental audits,
• Ensures the performance of state administration in the administration of state assets and liabilities, mortgage banking, building societies, and exercises supervision of the activities of EXIMBANKA SR.

1. Financial Directorate of the Slovak Republic

• The state administrative body in the field of taxes, duties and customs,
• Manages and checks tax and customs authorities,
• Develops new concepts of financial development.

1. Financial Administration Criminal Office

• Fulfils and ensures the role of the detection and investigation of offenses committed in connection with breaches of financial legislation

3. Specialized financial authorities and institutions.

Specialized financial bodies and institutions of the Slovak Republic include:

1. Insurance authorities,

As stated in Law No. 39/2015 Coll. On Insurance and on Amendments to Certain Laws as Amended, insurance authorities include:

• insurance institutions engaged in insurance activities, i.e. acceptance of insurance risks, assessment and management of insurance risks, management of insurance contracts, creation of technical reserves and maintaining the required solvency margins, liquidation of insurance claims, provision of insurance contracts and associated services, and
• reinsurance institutions engaged in reinsurance activities, i.e. insurance risk management, risk assessment and management, management of reinsurance contracts, creation of technical reserves and maintenance of the required solvency margins, provision of reinsurance contracts, and provision of advisory services in the field of insurance.

1. Foreign exchange authorities,

Law No. 202/1995 Coll. On Foreign Exchange as Amended defines foreign exchange authorities as:

• The Ministry of Finance of the Slovak Republic which implements the scope of this Act in relation to other ministries and central state administration bodies, state budget organizations and state contributory organizations, state special-purpose funds, and legal entities established by special laws, which have a financial connection to the state budget of the Slovak Republic, and in relation to the municipalities and their established budgetary and contributory organizations, and
• The National Bank of Slovakia, which exercises jurisdiction under the aforementioned Act in relation to other Slovak and foreign entities.

1. State Treasury,
2. Debt and Liquidity Management Agency,
3. Financial Market Authority,
4. Other institutions active in the financial market

• Building societies,
• Supplementary pension companies,
• Management companies,
• The Stock Exchange,
• Securities brokers.