The Slovenia Times

EBRD Chief Economist Says Valuation of Bad Loans Critical, Sees Banks Consolidatin


Berglof said the new government had taken "a number of decisions that will help resolve the problem. I think the establishment of the Bank Assets Management Company (BAMC) was a very productive step. Now what is needed is to start the transfer of assets. In order to do that, the valuation of these assets is critical."

He noted there had been "some disagreements that have slowed down the process. The thing we know for sure about this process is if you don't deal with it, the costs will increase. The costs for the whole banking system will increase every day that this process is extended. The key now is to agree on the valuation, start the asset transfer. Any delays will make the problem bigger."

Asked whether it was doable that the first assets are transferred to the BAMC in October as currently planned by the government, Berglof said that sounded feasible. "But again, it is critical to agree the valuations."

As for Slovenia's prospect to emerge from the crisis on its own, without having to ask for a bailout, Berglof said it was "absolutely key there is agreement on the rules of the game: what are the expectations from the government, from both Slovenian and foreign banks, what can we expect from international organisations".

"Getting this framework in place is also very important for the EBRD. We can help with bank reconstruction, we can help companies that have trouble accessing finance, but for that we need the rules of the game."

Berglof suggested the EBRD could help with bank restructuring either through equity or with financing. "We'd be open to both options. But it's very important that there's agreement on the framework and commitment from the government and from other institutions about the rules of the game. We have unique capacity to enter on debt or equity side and help with policy issues and technical assistance."

The EBRD is also willing to help consolidate the banking system. "It is my impression that Slovenia is over-banked to some extent...One part of the solution must be that some banks merge or some banks are absorbed by larger banks. My understanding is that there are some very concrete discussions about individual banks, also between the largest banks. We can facilitate that," he said.

Asked how many banks Slovenia will have once the consolidation is completed, Berglof said: "You want healthy competition, you get that by having an open financial system...I think in the end there will probably be four to five large banks."

Turning to Slovenia's privatisation plans and the overall lack of foreign direct investment, Berglof said the EBRD had been advocating privatisation for a long time and was willing to take part in the process as long as the level of confidence increases and the whole framework works.

"Saying that Slovenia has not attracted FDI is a euphemism, there was a lot of interest by foreign companies, but because of the links between banks, companies and the state it was very difficult for foreign investors."

Berglof would not comment on specific companies that the EBRD might be interested in, but noted that it was "important that we are willing to support the restructuring...the EBRD can help good companies that have constrained access to financing".


More from Nekategorizirano