Despite a slight improvement at the start of 2011, the total volume of loans requested last year decreased by almost EUR 5bn to EUR 13.3bn. The 27.2% drop followed a 11.3% decrease in 2010. Only three banks and two savings banks saw no drop in demand in 2011.

The total amount of loans approved last year was EUR 9.5bn, while the figure for the first six months of 2012, when loan demand reached EUR 6.3bn, was EUR 4.4bn.

The decline is a result of the economic contraction and deleveraging, with Banka Slovenije highlighting a particularly worrying 28% drop in 2011 in the demand for investment loans.

On the other hand, demand is up for the restructuring and reprogramming of loans. The amount of loans for this purpose increased by 14.6% last year.

Banka Slovenije established that debt financing still dominates at companies over equity financing, which is why the central bank feels that purging banks of bad loans will not be enough to boost lending.

Meanwhile, the rate of rejected loans increased slightly to 30.6% in the first half of this year, but has been hovering at around 30% since 2010. A total of EUR 3.7bn in rejected loans were registered in 2011 and EUR 1.9m in the first six months of 2012.

According to the survey, banks in foreign ownership did a somewhat better job in adopting to the change in demand for loans, slightly reducing the rate of rejected loans also on account of better results.

The rejection rate however still remains much lower with Slovenian-owned banks. It was at 23.5% in the first half of 2012 and at 19.6% in 2011 at large Slovenian banks, while the rates for foreign banks were 45.3% and 48.8%.

According to the central bank, the survey shows a transition in demand to banks in foreign ownership, which however reject many requests due to poor credit standings.

On the other hand, businesses are rejecting the credit conditions offered, as interest rates at Slovenian banks, which on the average exceed rates at eurozone banks, are uncompetitive.

Banka Slovenije's board of governors feels that banks are responding to the deteriorating situation in the economy and is proposing that the agony of companies without a future be ended as soon as possible with effective legal procedures.

Banks should focus on two other groups, one including companies affected by the crisis and needing an appropriate reprogramming of loans or ownership restructuring and the other companies which are rejecting existing borrowing conditions and thus demanding a more flexible approach.