Commission Report 2002 (Slovakia)

• Progress since the last Regular Report
• Overall assessment
• Conclusion

Chapter 4: Free movement of capital

Progress since the last Regular Report

Since last year's report, steady progress has been achieved in this area.

In the field of capital movements and payments, long- and short-term capital inflows have been further liberalised. Following the entry into force of an amendment to the Ministry of Finance and National Bank of Slovakia Decree implementing certain provisions of the Foreign Exchange Act, operations with foreign securities that are not traded on the primary market of a foreign stock exchange have been liberalised. An amendment to the Foreign Exchange Act, adopted by the Parliament in June 2002, will liberalise, from January 2003, operations with financial derivatives and will abolish the possibility of setting a limit on the export and import of banknotes and coins (domestic and foreign currency). From January 2004, the same amendment will authorise Slovak residents to open accounts abroad and will remove both their obligation to transfer financial means acquired abroad into the country and the current restrictions on the purchase, exchange and selling of real estate abroad. The re-codified Act on the Insurance Industry, effective from March 2002, has removed restrictions on the investment of insurance company reserves into foreign securities. An amendment to the Act on Supplementary Pension Insurance of Employees has abolished the restriction related to investment in supplementary pension insurance funds as of July 2002. The remaining restrictions on foreign participation in companies operating lotteries and other similar games will be removed on the date of accession according to the Act on Lotteries and Similar Games, adopted by the Parliament in June 2002. Liberalisation of investment in air carriers will also be applicable from the date of accession.

Concerning the acquis on payment systems, the Act on Payments, adopted by the Parliament in June 2002 and expected to enter into force in January 2003, aims to fully transpose the Directives on cross-border credit transfers and on settlement finality and to ensure compliance with the provisions of the acquis on electronic payment instruments.

As regards money laundering, an amendment to the Act on Protection against the Legalisation of Proceeds from Crime, which entered into force in September 2002, will abolish existing anonymous accounts (bearer passbooks) from January 2004 with a prescription period until January 2007. An amendment to the Criminal Code, adopted by the Parliament in June 2002, implementing the Convention on the Protection of the EC's Financial Interests and its Protocols, is expected to introduce criminal responsibility for legal entities in the course of the re-codification of the Penal and Criminal Codes.

Overall assessment

In the field of capital movements, liberalisation in line with the acquis is now almost complete. The main remaining restrictions are linked to the acquisition of real estate by non-residents. This issue still needs to be addressed.

As regards payment systems, the Slovak legislation is broadly in line with the acquis. A body to handle customer complaints about cross-border credit transfers has yet to be set up. Infrastructure in relation to payment and securities' settlement is in place. The envisaged introduction of a real time gross settlement system for inter-bank payments to improvement the payment infrastructure further needs to be pursued.

As regards money laundering, the legal framework has significantly improved, but continued efforts are needed, particularly in terms of practical implementation of the new rules applying Directives and international standards. The processes for client identification, keeping records of transactions and all requirements related to reporting to the Financial Intelligence Department established within the Financial Police Office are effectively in place in the Slovak banking sector. This legislation also has an impact on the non-banking sector. A further effort to co-ordinate various sectors is needed. The framework of the secondary legislation regarding the regulatory process should be further improved, regarding the non-banking sector in particular.

Conclusion

In its 1997 Opinion, the Commission concluded that the degree of capital movement liberalisation already achieved by Slovakia was very substantial, but liberalisation of inward capital movements was proceeding much more rapidly than that of outward capital flows. It added that Slovakia was expected to face no major difficulties in eliminating the remaining restrictions on the movement of capital in the medium term, thus fully assuming the Community acquis in this area.

Since the Opinion, Slovakia has made very solid progress, both in aligning its legislation and in developing the necessary administrative structures.

Negotiations on this chapter have been provisionally closed. Slovakia has been granted transitional arrangements concerning the acquisition of agricultural and forestry land (for a period of 7 years following accession). self-employed farmers from EU countries who have resided and actively farmed in Slovakia for three years are excluded from the transitional arrangements. Slovakia is generally meeting the commitments it has made in the accession negotiations in this domain.

In order to complete preparations for membership, Slovakia's efforts should now focus on completing alignment and eliminating all remaining restrictions, completing the administrative structures necessary to implement the acquis in this area, and reinforcing administrative capacity, paying particular attention to the bodies involved in the fight against money laundering.

---

Next: Chapter 5: Company law
Up: 3.1. The chapters of the
Previous: Chapter 3: Freedom to provide