The Czech Anti-Monopoly Office (AMO) recently submitted documents concerning the state subsidy provided in the late 1990s to Ceska sporitelna (CS), Erste Bank's 98%-owned Czech subsidiary, to the European Commission. The AMO already approved the subsidy (which is estimated at CZK 46 bil., i.e., EUR 1.44 bil.) The documents also include Ceska sporitelna's restructuring plan, which will be a key factor in the EC's consideration of the subsidy.
Documents concerning state subsidies to other domestic banks, including Komercni banka, are to be submitted by the Czech Finance Ministry and the AMO to the EC by year-end (or by the Czech Republic’s EU accession date, May 2004).
Should the EC find the subsidies to CS or KB to breach the EU's acquis communautaire, and if the effects of the subsidies persist beyond the Czech Republic's EU entry date, the EC could require the banks to partially repay the subsidies. We believe, however, that this worst-case scenario is very unlikely, as (i) the Finance Ministry has (or will have) elaborated on the restructuring plans for both banks, (ii) the subsidies were primarily intended to stabilize the entire domestic banking sector, (iii) the subsidies were approved by domestic regulators, and (iv) the Czech government will strongly lobby the EC for the subsidies to be accepted.
Moreover, the subsidies were provided as part of the Czech Republic's overall economic transformation toward EU accession. As a result, we do not expect this to be a major threat to the banks' performance at the moment.
Jan Hájek