Reviewing more than 40 deals involving Slovenia's leading state-owned banks, NLB and NKBM, the Corruption Prevention Commission found numerous instances of corruptive behaviour and other violations.

"Such actions suggest that, in Slovenia, but especially in its state-owned banks, these have become wide-spread and accepted management practices," the commission said on Tuesday.

It said that the clean-up of bank portfolios must be accompanied by a comprehensive clean-up of banking practices and ethics at Slovenia's state-owned banks. New business models will be needed, it says.

"We must ensure that corruptive behaviour is done away with in the Slovenian banking system, especially at the state-owned banks, which hold 80% of all bad loans in the country," the anti-graft watchdog says.

Moreover, it says politics carries a large chunk of the blame for the wrongdoing at banks. "If we want order in society, business and the political arena, we must cut the crony and corruptive links between politics, business and individuals."

According to the watchdog, examples of foul practices at banks are seen in both the top-tier and middle management.

In approving investments, the biggest problem is in the informal delegation of tasks. Moreover, approval of investments often lacks transparency and is conducted by persons exhibiting risk of abusing their office and issuing illegal or unethical directions to their subordinates.

The commission also established that there is a clear and present risk that loans are approved on the basis of personal, business and political connections.

Representing the top threat for corruption in Slovenia's state-owned banks is staffing. Legislative loopholes which allow persons who have in the past been found to have acted unethically and wrongfully and persons without sufficient expertise and experience to hold leading positions at banks only increase this risk.

The Commission also criticises the central bank for being too soft on violators. Despite having a legal basis, Banka Slovenije only rarely resorts to the toughest sanctions against rule-breakers, the report states.

"As part of its oversight duties, Banka Slovenije issued over 800 warnings due for various findings of risk, but not once did it issue reprimands or suspended the licenses of management board members... This despite the fact that it has filed criminal complaints against a number of management representatives."

The commission therefore concludes that the central bank has failed to act appropriately in establishing a system of rules for the safe and proper operations of state-owned banks.

The findings included in the report that has been attached as an addendum to the Corruption Prevention Commission's report for 2011/2012 does not specify specific deals or individuals as these are part of an ongoing criminal investigation with which the commission in helping law-enforcement bodies, the commission explained for business daily Finance.