State Could Provide Up to EUR 4bn in Bad Loan Guarantees


The minister, who estimated last week that the state costs of bonds issued to cover the bad claims would probably not exceed EUR 1bn, commented today for the press on a leaked preliminary version of the bill.

In line with the plans, the restructuring of the banking system would be carried out by a special fund for the stability of banks, which would be owned by a special new entity managing non-performing bank loans.

Šušteršič argued that this would enable banks to focus again on their primary operations, which do not include being owners of companies or the restructuring or salvaging companies.

He said that the entity being established was a novelty in Slovenia and that the government would try to find the right people to run it, people who have experience with debt restructuring.

The minister confirmed that EUR 4bn was the top figure for the state guarantees for bonds that are to be issued by the new entity – to be scrutinised by the Court of Audit – he however did not wish to speculate on the total final costs to the taxpayers.

The final figure and the potential need for new borrowing by the state for putting its banks in order will be known once the transfer of claims is carried out, he said.

According to the daily Dnevnik, the draft bill envisages the fund restructuring the banks to be financed with reimbursements from banks, whose amount will be set down in contracts. Financial sources will also include state deposits at banks and revenues from the planned privatisation of banks.

Dnevnik moreover reported that many key issues related to the tackling of bad loans will be addressed by the government simply with executive acts.

This would allegedly also include decisions on which claims are to be transferred, under which conditions, at which value and on what guidelines the new entity should follow.

The minister explained that the bill will not refer to any of the existing classifications for bad loans or credit ratings, as transfers will be conducted on the basis of an agreement between the entity and the banks. Thus, nothing will run automatically, he noted, arguing this would prevent banks getting a blank cheque.

Each bank will also agree on a business plan with the claims management company, which will help determine the amount of the claims transferred. With insurance being tied to the claims, the shares of a number of companies will also be transferred onto the new entity.

The state moreover plans to follow up the restructuring with a partial withdrawal from the three biggest banks, where it would however preserve at least a controlling stake of 25% plus one share.

Šušteršič could not comment on reports that a US investor was interested in the NLB bank, saying only that non-EU investors were also welcome.