Slovakia achieves high overall compliance with international standards and codes, with a score of 57.5 out of 100 in our Standards Compliance Index. Slovakia's compliance in the area of macroeconomic fundamentals is high. However, its compliance in the market infrastructure is average. Banking supervision has significantly improved with the passage of the 2001 Banking Act and is broadly in line with international requirements. Motivated by its objective of adopting the Euro by 2009, Slovakia has also taken positive measures and passed enabling laws to strengthen its corporate governance, auditing, money laundering, payment systems, and securities regulatory frameworks. Its insurance supervisory regime is also assessed to be broadly in line with international standards. On the downside, Slovakia lacks independent assessments of its compliance with the Core Principles for Systemically Important Payment Systems.

Macroeconomic Policy and Data Transparency

Slovakia has been a subscriber to the International Monetary Fund's (IMF) Special Data Dissemination Standard (SDDS) since September of 1996, and first posted metadata on the SDDS website in October of 1998. According to the IMF's SDDS website, Slovakia presently observes or exceeds all of the SDDS's standards for coverage, timeliness, and periodicity of data in the categories required on the website. Slovakia does not avail itself of any flexibility options. It provides summary methodologies for all required datasets, and disseminates advance release calendars for all those to which this requirement is applicable. With regard to this general standard and all four of its principles, the website and other sources indicate that Slovakia is in full compliance with SDDS requirements, except for providing advance notice of major changes in methodology. The IMF's SDDS website indicates that changes in methodology are publicly announced, but usually only after implementation. More »

According to the International Monetary Fund's 2002 Financial System Stability Assessment (FSSA), the National Bank of Slovakia (NBS) achieves very high transparency in its formulation and implementation of monetary policy. Weaknesses were noted in two areas, however. The FSSA recommended that Slovakia should institute more formal procedures for advance consultation when considering technical changes or changes in its instructions and guidelines, and also suggested that it could improve its disclosure of emergency credits. Nonetheless, the FSSA applauded the NBS's determination to continue to improve its transparency going forward. Slovakia is a subscriber to the Special Data Dissemination Standard (SDDS) and observes or exceeds all of the SDDS's standards for timeliness, periodicity, and coverage. More »

In 2002, the International Monetary Fund (IMF) published a Report on the Observance of Standards and Codes (ROSC) in which it concluded that Slovakia was compliant with its standards for fiscal transparency in a number of areas. The report attributed this to the Slovak Republic's accession to the European Union in 2004, which inspired a rapid move to amend or introduce legislation that would bring the regulatory framework into line with international standards. By the time of the 2005 IMF ROSC update, significant progress toward international best practice had been achieved. The 2005 assessment found that Slovakia had addressed most of the Fund's earlier recommendations. Among the improvements cited were enhanced coverage of fiscal information, strengthened budgetary laws, and progress toward fiscal decentralization. Slovakia has subscribed to the IMF's Special Data Dissemination Standard (SDDS) since September of 1996, and the SDDS website discloses that it observes or exceeds all SDDS standards, availing itself of no flexibility options. However, some shortcomings still exist and relate to audit requirements for public enterprises, state budget data, and the newly established extra-budgetary environmental fund. More »

Institutional and market infrastructure

In preparation for, and since actually acceding to the European Union (EU), Slovakia undertook significant reforms to its creditor rights and insolvency frameworks, in order to bring them into line with EU practice. In 2002, the World Bank found the creditor-rights framework to be fragmented, inadequate, and inefficient, but a Commission was established to develop comprehensive reforms that complied with the World Bank Principles on Effective Insolvency and Creditor Rights System. A 2006 report by the European Bank for Reconstruction and Development found that, among other things, Slovakia's insolvency legislation had addressed many of the shortcomings identified in earlier reports. However, a 2007 IMF Financial System Stability Assessment update found that the system remains "inefficient." According to the World Bank's "Doing Business Indicators" of Slovakia's performance on three measures of closing a business (cost, time of procedure, and return to creditors), Slovakia was ranked as achieving an average cost (measured in a percentage of the settled estate) of 18%, an average time (in years) of 4.0, and an average return for creditors (measured in cents on the dollar) of $0.452. This compares to a regional average of 13.7%, 3.2 years, and $0.289 cents on the dollar. For the OECD member states as a whole, the averages are 7.5%, 1.3 years, and $0.741. More »

According to a 2006 European Commission (EC) publication on the planned implementation of International Financial Reporting Standards (IFRSs) in European Union (EU) member states, Slovakian listed and unlisted companies are required to prepare their consolidated accounts in accordance with IFRSs. Slovakia thereby complies with EC Regulation No. 1606/2002, which requires all EU-listed companies to prepare consolidated accounts following IFRSs as endorsed by the EC, starting on January 1, 2005. Regarding the options provided for the member states for the extended use of IFRSs, IFRSs are required in the individual accounts for any company meeting the specified size criteria, banks, insurance companies, securities brokers, and some others. Other companies must prepare financial statements in accordance with Slovak accounting principles. In a 2001 assessment of auditing and accounting practices in Slovak Republic, the World Bank noted that there was a "large gap" between Slovak accounting standards and IFRSs and, among other issues, recommended full adoption of IFRSs. Based on the World Bank recommendations, the Slovak authorities initiated a program for reform in the area of accounting and auditing with the support of the Institutional Development Fund's Grant. The Slovak government set up the Project Implementation Unit in 2003 to strengthen the regulatory framework and the accountancy profession. As of 2007, a KPMG report noted that Slovak accounting principles are slowly converging with IFRSs; however differences exist. More »

In its 2003 Corporate Governance Sector Assessment Project, published in 2004, the European Bank for Reconstruction and Development (EBRD) came to the conclusion that corporate governance legislation in Slovakia is in "medium compliance" with the Organization for Economic Cooperation and Development's Principles of Corporate Governance. The World Bank, in its 2003 Report on the Observance of Standards and Codes, made recommendations in three broad categories: legislative reform, institutional strengthening, and voluntary/private initiatives. These issues have since been addressed to a certain extent. According to a 2006 EBRD Commercial Laws of the Slovak Republic Assessment, the regulatory framework in Slovakia has improved, and corporate governance legislation is relatively effective. However, the report went on to note that important shortcomings remain in relation to the "responsibilities of the board," "disclosure and transparency," and "rights of shareholders." Furthermore, related party transactions are not well detailed in the legislation, prosecutors lack experience in corporate law cases, and judges and lawyers have limited access to and use of case law. The Bratislava Stock Exchange issued a Code of Corporate Governance in September 2002, which listed companies must adhere to on the "comply or explain" basis. In January 2006, the Financial Market Authority was integrated into the National Bank of Slovakia, which became the integrated financial supervision authority in Slovakia, under the 2004 Act on Supervision of the Financial Market. More »

On May 17, 2006, Directive 2006/43/EC of the European Parliament and the Council came into force requiring all statutory audits of annual and consolidated accounts to be carried out on the basis of International Standards on Auditing (ISAs) as adopted by the European Commission (EC). European Union member states shall adopt and publish the provisions necessary to comply with this directive before June 29, 2008. Member states may impose additional requirements relating to the statuary audits of annual and consolidated accounts for periods expiring on June 29, 2010. In a 2001 assessment of Slovak auditing and accounting practices, the World Bank pointed out the differences between Slovak requirements and ISAs and recommended wholesale adoption of the international standards. Based on the World Bank recommendations, the Slovak authorities initiated a program for reform in the area of accounting and auditing with the support of the Institutional Development Fund's Grant. One of the purposes of the reform was to ensure that ISAs would be adopted, without modifications, as mandatory auditing standards. As stated in the Slovak Chamber of Auditors 2007 self-assessment and other publications on the issue, in line with the EC directive and the World Bank recommendations, effective December 31, 2004 Slovakia adopted ISAs as national standards for auditing. More »

Regarding Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) activities, according to a 2006 report by the European Committee on Crime Problems (CDPC) and the Select Committee of Experts on the Evaluation of Anti-Money Laundering Measures (MONEYVAL), Slovakia is only partially compliant with most of the Financial Action Task Force's (FATF) Forty Plus Nine Recommendations (R) and Special Recommendations (SR). The most significant shortcoming identified in the report is Slovakia's noncompliance with SR II, dealing with the criminalization of terrorist financing. However, in 2007, Slovakian authorities submitted a CDPC & MONEYVAL progress report addressing several of the shortcomings in the 2006 report regarding R1, R5, R10, R13 and SR II and SR IV. According to the report, most of the insufficiencies identified in the 2006 CDPC & MONEYVAL assessment will be eliminated once Slovakia has transposed the Third European Union (EU) AML/CFT Directive into a new AML/CFT Law. The Third EU Directive requires member countries to adopt the FATF's 40+9 recommendations. Further, the 2007 CDPC & MONEYVAL report notes that the lack of legislation regarding the criminalization of terrorist financing will be addressed with the expected implementation in late 2007 of relevant amendments to the Criminal Code. According to a 2007 report by the International Monetary Fund, Slovakia has fully harmonized its AML legislation with the Second EU directive. More »

The International Monetary Fund (IMF), in a 2002 assessment of Slovakia's systemically important payment system, Slovak Interbank Payment System (SIPS), identified the system as efficient and largely observant of the Core Principles for Systemically Important Payment Systems (CPSIPS) promulgated by the Committee on Payment and Settlement Systems. However, since the 2002 IMF assessment, the payment system's architecture in Slovakia has had significant changes such as: (1) the National Bank of Slovakia (NBS) replaced the previous operator of SIPS, the Slovak National Clearing Centre; (2) a real-time gross settlement (RTGS) subsystem was incorporated within SIPS to process large-value payments; and (3) a new Act on Payment System was passed in 2002, strengthening the legal framework and bringing it in line with European Union (EU) Directives. Subsequent to these changes, there has been little information publicly available regarding Slovakia's compliance with the CPSIPS. According to a 2007 European Central Bank report on Payment and Securities Settlement Systems in the EU, the NBS has adopted the CPSIPS as a basis for conducting the oversight of SIPS. A 2007 IMF report also finds that Slovakia has further improved its payment system infrastructure since the 2002 IMF assessment and made significant progress in its preparation for integration into the TARGET 2, the EU's RTGS system. More »

Financial Regulation and Supervision

The International Monetary Fund (IMF), in a 2007 update of its 2002 Financial System Stability Assessment (FSSA) of Slovakia, concludes that the country either complies or largely complies with the Basel Core Principles (BCPs). According to the 2002 FSSA, financial sector supervision was weak in Slovakia, and the country was either not observing or only partially observing most of the BCPs. However, as noted in the 2007 IMF report, the regulatory framework has improved significantly since the 2002 IMF assessment, as a result of the authorities drive to address shortcomings and comply with European Union (EU) directives. The National Bank of Slovakia seems ready to start implementation of the New Basel Capital Accord (Basel II). The 2007 IMF Update also addresses Slovakia's banking supervision practices with the new 2006 BCPs and Methodology. Accordingly, Slovakia shows a high level of observance with the new BCPs as well, and is found lacking in only four principles, namely Capital Adequacy (BCP 6), Problem Assets, Provisions and Reserves (BCP 9), Interest Rate Risk in the Banking Book (BCP 16), and Internal Control and Audit (BCP 17). However, the focus of this report is on Slovakia's compliance with the 1997 BCPs. More »

The 2007 International Monetary Fund (IMF) Financial System Stability Assessment (FSSA) Update reports that Slovakia has addressed most of the recommendations from an initial IMF FSSA published in 2002. Slovakia has achieved significant progress in improving its supervisory and regulatory framework and there is now a high standard of financial sector regulations. Progress in the supervision of financial areas was uneven, however. The consolidation of financial sector supervision under the National Bank of Slovakia in 2006 should lead to greater improvement in the areas which have experienced comparatively less progress. Despite the improvements to the regulatory framework and in economic performance as well as Slovakia's 2004 accession to the European Union, there has been little actual change in the size and structure of capital markets since the IMF's 2002 assessment; and they remain small and illiquid. There are a few remaining challenges mentioned in the 2007 IMF FSSA Update that need to be addressed in the short-to-medium term, especially with regard to financial institution supervision. More »

In 2002, the International Monetary Fund (IMF) conducted a Report on the Observance of Standards and Codes (ROSC) based on the 2000 International Association of Insurance Supervisors (IAIS) methodology. The assessment was performed prior to the enactment of a new Insurance Act in Slovakia in March 2002, and weaknesses were found in the regulatory and supervisory framework, including a lack of human resources and experienced staff to conduct insurance supervision. The IMF report made several recommendations, and Slovakian authorities responded that the adoption of the 2002 Insurance Act would address deficiencies and improve compliance with the 2000 Insurance Core Principles (ICPs). As a follow-up to its 2002 assessment, the IMF undertook a 2007 ROSC Update based on the revised 2003 IAIS methodology. According to the 2007 report, insurance supervision in Slovakia has shown a substantial improvement, and is broadly compliant with the 2003 IAIS ICPs. Furthermore, most of the IMF recommendations have been implemented through the transposition of European insurance directives into national legislation, and Slovakia has improved its collaboration with foreign supervisors. However, according to the same report, shortcomings remain in the level of technical provisions and insurance fraud. Internal and external auditors, as well as actuaries, also play a limited role in the supervisory framework. More »

Legend:

Credit Ratings

Moody's A1/Stable

Fitch A+/Stable

Standard & Poor's A/Positive

Macroeconomic Data

2007 GDP (Current Prices): 75 billion USD (IMF)

2007 GDP (Per Capita): 13,857 USD (IMF)

2008 GDP (Growth Forecast): 6.6% (IMF)

2008 Inflation (CPI): 3.6% (IMF)

2007 Unemployment: 8.6% (CIA)

2006 Foreign Direct Investment

FDI (Inward): 4.2 billion USD (UNCTAD)

FDI (Outward): 0.4 billion USD (UNCTAD)

2006 Official Development Assistance

ODA (Received): N/A million USD (OECD)

ODA (Disbursed): N/A million USD (OECD)