Bad, Bad Bank. Heel.

As both readers of this blog know, the government of Miro Cerar decapitated the management and the board of the BAMC – Bank Asset Management Company, a.k.a. the “bad bank“. With dismissal of Lars Nyberg as head of the board and Torbjörn Månsson as CEO, the rest of the international team left, as well, leaving a power vacuum at the top of the institution tasked with making the most of bad loans that hobbled the Slovenian banking sector and the economy in general.


Since its conception, the bad bank has been an unloved child, more or less forced upon the government(s) by the looming troika back in the days when shit was getting real and Slovenia was teetering on the brink of the bailout abyss. Now, the bank had its fits and starts, with outside consultants being heavily relied upon to turn the legal mandate into a reality while the political turmoil was reaching new peaks and the mandate itself was frequently changed. The management of the bad bank also changed quite a bit, finally settling down with Nyberg as head of the Board and Månsson (who served as a consultant during the conception of the bank) as CEO.

The bank and its management were never far from centres of controversy. Be it the way they managed assets, or the very nature of the assets they were given to manage, they always irked somebody. And since the top execs were outsiders (with Slovenians serving in non-executive management roles), there was a noticeable unease and even apprehension with the institution across the political spectrum. This of course did not prevent the political parties bashing each others’ brains out with whatever shit the bank dug out on any given day, depending on whose daily agenda the issue at hand served best. But the thing was that during the last 25 years enough dubious business moves were made and/or politically ordained on both sides of the aisle, that no one was coming out of the cesspool clean. There was no guarantee that politically sensitive issues will be kept at bay, that names will not be named and that clout will be kept.

This is one of the reasons the bad bank was under intense scrutiny from the very beginning. Leading the charge was the Court of Audit which, understandably, wanted to keep an eye on how state’s assets were being managed. Turns out that the management had a hard time putting legal provisions in practice and that not all decisions were up to standards. Accounting and otherwise. To put it plainly: in 2013, the first year of operation, money was spent lavishly but to little effect. Månsson defended his work saying that the mandate was changed frequently and that a lot of that money went for adapting to the new circumstances. And, to be honest, in 2014, the bad bank did come up with results, selling some debt (transferred at a discount) for a profit. On the other hand, managing real estate left a lot to be desired, to put it mildly. So the results were there, albeit not spectacular . But still. Since the bad bank was chartered for five years with the understanding that it would get another five, things were seemingly moving in the right direction.

Wag the dog

Not everyone was pleased with that. Local economic chieftains, once considered pillars of society (aren’t they all, until they come tumbling down), were quite unhappy with outsiders basically showing them they know jack shit about running a business when the going gets rough. With the downfall of economic powerbases a number of different informal networks, consisting of politicos, moneymen and opinion makers began to unravel which again, was an unwelcome turn of events for many. Which is why the bad bank was under a near-constant stream of accusations of wrongdoing. Most of these accusations were based on the audit for 2013, while others, more populist ones, included the claim that “foreigners were lining their pockets on account of the Slovenian taxpayer” and scandalisation over salaries of the BAMC top brass. A classic wag the dog moment.

And, as usual in Slovenia, this worked pretty well. BAMC management was well paid. Extremely well paid, to be exact. 20k € before taxes is not peanuts in Slovenia, although one gets left with slightly more than 50% of that after the various parts of the state (welfare and otherwise) have taken their share. Still, not exactly what one would call a negligible amount of money.

But while your average Slovenian was scandalised over the numbers, what no one cared about was that these rates are more or less common in this line of business. For all intents and purposes, Månsson was the official receiver of the state and para-state assets. And if you want someone from an international market to run that for you, you pay international prices. Sure, the management of the bad bank in all likelihood was not top-tier, but then again, Slovenia can’t afford to pay top-tier prices. We got our money’s worth and still Månsson and his people were able to do more in a year and a half than the various local polit-economic brain trusts were able to do in a decade. Which begs the question who exactly was, in fact, overpaid.

Point being that the public outcry over paychecks is just a smoke-screen for taming a force that was wreaking havoc on the established order of things. Because regardless of the waste the 2008 meltdown laid upon the economic landscape of this country, the balance of power remained more or less unperturbed. Even the fact that the right-wing slammed the left-wing for undermining the bad bank, it only did so because it was not itself in power. And had it been, the left-wing would have slammed the right-wing for fire-selling state assets.

When Christmas comes early

Oh, wait, but this is exactly what the left-wing has been doing for the past year and a half. You see, from their point of view, PM Cerar and FinMin Mramor are little more than agents of the neoliberal locusts, while from the point of view of the right-wing they are nothing but custodians of the communist economic power structure. Both views are as much self-serving as they are wrong. Cerar and Mramor (the latter definitely being on the hawkish side of the austerity debate) are primarily concerned with rocking the economic boat as little as possible. And since the SMC is essentially a populist party, given its quick rise and patch-work platform, they could ill ignore the issue which, however misguided, enraged the people. It was therefore easier to cut Nyberg and Månsson loose than to pick a fight that could well bring down the coalition.

As a result, the Social Democrats, the most junior of the three coalition partners, have again gained in strength as they will no doubt drive a hard bargain in negotiating who gets to be the bad bank’s new top dog. Karl Erjavec of DeSUS, too, will strive to cash in on the situation, but his is a different playing field. Everyone else, too, will want a piece of the pie in return for not causing too much trouble. The only ones who will be left out in the cold nursing their hurt pride will be the ones who carried the anti-bad bank banner all those years: the United Left (ZL).

The ZL went all out against BAMC on ideological grounds. Pure as their motives were, the party somehow failed to notice that they are merely carrying bag for their left-wing competition. While the “only true left-wing party” was up in arms, the SD (bleeding voters and probably ripe for a trip to the Happy Hunting Ground) was sitting back and enjoying the ride and is now laughing all the way to the (bad) bank. To put it another way: Christmas came early for the SD and ZL was the Santa’s little helper.

And now, in the power vacuum, all kinds of shady deals can be made. Including the one which seems to have caused the downfall of the bad-bank management in the first place:

This seems to be the crux of the matter. The moment it actually started doing what it was supposed to be doing, the bad bank stepped on so many toes so fast everyone wants it to just disappear. Much of this was summarised in this must watch interview-cum-explanatory with BAMC project manager Janne Harjunpää (in English) ran last night by the RTVSLO (of all places 🙂 ). The present situation is nicely summed up in this six-minute clip, together with the explanation why both left- and right-wing want BAMC tamed.

And before someone goes ga-ga over yesterday’s CrimPolice raid at the bad bank, supposedly investigating consultants’ fees and board wages, let us not forget that a) these things rarely come to fruition and b) are probably nothing more than just a back-up plan in case the dismissed top brass claims severance pay.

It’s the power, stupid

At the end of the day, the government of Miro Cerar will have to choose a new board. The PM said this will be done by an international tender, but this means nothing if he and the finance minister fail to curb the greed and power grab of the traditional political parties. Not only are they used to this, they need such an economic backbone to plot their way back to power.

After all, that is what it is all about.