The Slovenia Times

Governor Defends Decision to Liquidate Two Banks


"The potential bankruptcy of Probanka and Factor banka would place excessive stress on the financial stability in the remaining part of the banking sector, which is not in a good shape," Jazbec said at the extraordinary session of the National Assembly dedicated to the topic.

The liquidation of Probanka and Faktor banka, which together held a 4% market share, was announced by Banka Slovenije on 6 September. The state issued EUR 1bn in state guarantees to guarantee liquidity of the two banks during the procedure.

According to Jazbec, in the case of bankruptcy all deposits over EUR 100,000 in the banks would be frozen until the end of the procedure. Such deposits are also held by the state and municipalities, primarily those from the regions of Primorsko and Štajersko, he added.

There is a total of EUR 631m of deposits in the two banks, of which guaranteed deposits under EUR 100,000 account for EUR 400m. The money for payout would have to be secured by other banks in Slovenia. "Banks do not have this money, which is why the state would have to secure it in any case."

The proponents of the session, the opposition Democrats (SDS), who are bothered by what they see as the use of taxpayer money for private banks, meanwhile wondered who was going to "pay for the funeral" of the banks.

Andrej Šircelj of the SDS said that the citizens will pay for all the wrong decisions of the managements, supervisors in the two banks as well as regulatory bodies.

Šircelj noted that if the same pattern were applied for all banks in Slovenia, the state would have to secure EUR 14bn in guarantees. "Slovenia does not have this kind of money and it is not able to get it on the financial markets."

He noted that the banks had no money to pay their obligations. "It's not a big deal. Two banks went to hell and they have the right to go to hell. The only question is who is going to pay for the funeral costs."

Jazbec meanwhile explained that the measure taken by Banka Slovenije was aimed at ensuring security for deposits of savers in both banks. Probanka and Factor banka have a total of 35,000 savers, whose deposits amount to EUR 11,000 on average.

A bankruptcy of both banks would be also paid by taxpayers, he reiterated, adding that the supervised liquidation was only about providing financial stability and reducing costs for taxpayers.

"Most criticism was uttered only this week, when it was established that there is no pressure on other banks and that financial stability has been ensured," he added.

Finance Minister Uroš Čufer said that the government was faced with two bad choices, and opted for the lesser evil. According to him, the costs of supervised liquidation are somewhat lower than the costs of bankruptcy.

The SDS also demanded a report stating the reasons for the liquidation of the banks, a list of individuals who have deposits over EUR 100,000 and a list of single transactions over EUR 100,000.

Jazbec said that the central bank had already fulfilled all of its obligations regarding the matter, adding that it is prevented to provide certain data by the banking act.

The opposition deputies however still insist that the names of those responsible for the situation are revealed. "It would be fair to taxpayers to tell them who is going to be rescued," Marko Pogačnik of the SDS said.

He added that his party will get to the bottom of it. "We will fight for all matters to be revealed and the responsible ones to assume responsibility," Pogačnik said, adding that he also meant the central bank.

The opposition People's Party (SLS) also think that the names of the responsible ones should be revealed, while Ljudmila Novak of New Slovenia (NSi) said her party was against the burden of the bad management and decisions being loaded on the shoulders of taxpayers.

Managers and supervisors, who had the power of decision-making, should be held responsible for their decisions, Novak said, adding that the former central bank governor and members of the Banka Slovenije board are also to blame.

Coalition deputies meanwhile assessed the reaction of the government and the central bank as responsible and appropriate.

Jerko Čehovin of Positive Slovenia (PS) said that allowing Probanka and Factor banka to go bankrupt would further undermine trust in Slovenian banks and cause uncontrolled outflow of deposits to foreign banks.

Matevž Frangež of the Social Democrats (SD) also praised the government and the central bank for preventing the panic in the Slovenian banking system from spreading. Bankruptcy of both banks would be the most expensive solution for taxpayers, he added.


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