The ratings on Ceska Sporitelna a.s. (CS) reflect its majority ownership by Austria-based Erste Bank der oesterreichischen Sparkassen AG (Erste Bank; --/--/A-2), its strong position in Czech retail banking (which provides it with outstanding liquidity), and improving financial profile. The ratings are constrained by the difficult operating environment for banks in the Czech Republic, the challenge of implementing a widescale transformation process, and the difficulty of improving CS' operational risks and competitiveness. In July 2000, Erste Bank acquired a 52.07% controlling stake in CS (now 57.3%) from the Czech government for Czech koruna (Ckr) 19 billion ($544 million). Erste Bank is the second-largest bank in Austria, with total assets of €71 billion at Dec. 31, 2000. Erste Bank has become
