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Slovenia: Parliament Approves Amendmends to Banking Act

Published: October 30, 2013; 14:06 · (Vindobona)

Measures were taken to reduce costs for winding up of two small Slovenian banks.

Slovenia: Parliament Approves Amendmends to Banking Act / Picture: © Vindobona.org

In a partisan vote the Slovenian parliament has approved the amendmends to the banking act, according to State Secretary of Finances Mateja Vranicar, as reported by Slovenia Times. By this extraordinary measure, holders of hybrid debt capital instruments and shareholders will become obliged to contribute to the restructuring of the banking sector in case a financial institute does not meet the capital requirements. The step was made with the intention to unburden taxpayers. The requirements and limit will be set by the Slovenian National Bank in such a case. The amendmends were approved mainly to avoid further costs for the winding-up of two small Slovenian banks: Probanka and Factor banka. Both are currently in the liqudation phase.

In order to escape the vicious circle, Slovenia has to act quickly, the IMF stresses. “A prompt bank recapitalization based on a credible balance sheet assessment, which is ongoing and is expected to be finished by the end of the year, is the immediate priority. However, only by restructuring the corporate and financial sectors, and reducing the role of the state in the economy, can sustained growth be achieved. Without these reforms, recapitalizing banks will be only an expensive stop-gap solution, as loss-making corporations will generate new NPLs that will lead to renewed deterioration of bank balance sheets. Gradual, further fiscal consolidation should address the fiscal cost of the recapitalization and the rising cost of an aging population. Privatization proceeds should be used for reducing public debt.” the IMF underlines.

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