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In about tweet: Slovenia created a “bad bank” to solve the banking crisis. It hired Scandinavians to run it independently of old boys’ networks. They got too independent and were sacked.

As a measure for saving its failing banking sector, Slovenia in 2013 established a “bad bank”, officially called Bank Assets Management Company (BAMC). The BAMC purchased some 1.6B€ worth of non-performing assets from the banks which were also recapitalized by the government with some 4B€. Total cost of the operation is over 5.5B€ which is a lot of taxpayer money for a country with a population of only 2 million.

In 2013 Slovenian government hired few foreigners – independent of the local business milieu – to manage BAMC. Their independence proved unpleasant, to say the least.

The next government lowered their salaries mid-term, hoping they would quit. They did not. Possibly they found other means to remunerate their work. Possibly not. Then BAMC was investigated by the local Court of Audit and the local Commission for the Prevention of Corruption. Both institutions have been exploited for political battles in the past. Ironically, while having problems with the local watchdogs, the BAMC was certified internationally by Ethic Intelligence for its program to prevent corruption.

In the beginning of October a media campaign was launched that claimed that the foreign executives of the BAMC did not adjust their salaries to the government regulations. All national dailies and TV stations, without exception, played along in unison in a populist exploitation of envy and xenophobia.

Last week the centre-left government fired Chairman of the Management Board Lars Nyberg and CEO Torbjörn Manson claiming it “lost confidence” in them.

Old boys’ privatization

In the root of the matter was the privatization as it unfolded in Slovenia. Often it would have the form of the management buyout – the people who were managing the company would get a loan from the state owned bank to buy the company and then pay back the loan from the profits that the company was making.

There were two problems with this approach. Firstly, many would get the loan simply because they were part of the old boys network that controlled the Slovenian economy and banking ever since Slovenia was still a Socialist Republic.

And secondly, the economic crisis of 2008-2014 did hurt the businesses. They simply did not generate enough profit any more for the repayment of the loans. It could be that the crisis in Slovenia took such a long time precisely because of the unwillingness to admit that the old boys were are about to loose much their wealth and most governments were trying to postpone that.

 

Enters “bad bank”

Many such assets were transferred to the “bad bank” which was trying to make the best of that property; the best for Slovenian taxpayer and not for the owners or managers of the failing companies.

The trigger for the events described seems to have been the case of the Sava Holding Company. A must read is a letter by Lars Nyberg to the Prime Minister. If the reader has failed to look at author’s CV on LinkedIn earlier, now could be the time. This is his conclusion:

In the Sava case, given what I have seen and read, I feel a smell of corruption in every corner. Is this really what you meant in your campaign when you talked about fighting corruption? Is this the direction in which you want to lead Slovenia?

Indeed this seems to be the direction. Old boys seem to be taking over the BAMC to preserve their property and the capture of Slovenian state, economy, media and politics.

The direction got an even sharper image just a three days after the letter. On Thursday police special investigation forces raided the BAMC headquarters looking for “irregularities in salary and consulting contracts”.

The third Scandinavian at the top of BAMC team, Janne Harjunpää, is giving up as well, telling Slovenians to fight their own battles, that he is not their Che Guavara. This interview for Slovenian television is in English and starts at 0:52.

Capture

 

Key quotes:

We are working on some high profile cases. Apparently we have stepped on some very big toes.

Mr. Nyberg is a very senior person who has seen a lot, is the former vice governor of the Swedish National Bank, he was the adviser of Barroso, he has been everywhere. I have a reason to think he has a very precise nose.

The political left, including the government, believes that after all this the “bad bank” will be better. Spelled with a “t”. The right mostly believes it will be worse. The title of this piece is a compromise in spelling it.

PS. BAMC will be hiring. Newspapers are reporting that the government wants the top of the “bad bank” to be independent.

 

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