Slovenia to Guarantee EU4 Billion to Stabilize Banks

The Slovenian government said it will guarantee as much as 4 billion euros ($5.16 billion) to help recapitalize its banking industry, which is struggling with rising bad loans, Finance Minister Janez Sustersic said.

The euro-region nation plans to form a special government agency that will take on bad loans from the ailing financial industry, including the two state-owned banks Nova Ljubljanska Banka d.d. and Nova Kreditna Banka Maribor d.d. In return, the agency would issue bonds guaranteed by the government.

“We estimate that we will not need more than 4 billion euros to stabilize our banks, this should be the top ceiling,” Sustersic told reporters in Ljubljana today.“Each bank that will participate in transferring bad liabilities to this company will have to agree what will it do after the transfer, how will it improve its business performance. ”

Slovenia’s banking industry is at the center of investors’ concern that the country may be the next in the euro region to ask for an international assistance package to prop up its financial system. The banks in the former Yugoslav republic are solvent even though the situation is worsening, central bank Governor Marko Kranjec said yesterday, according to Finance newspaper.

Abanka Vipa (ABKN) d.d., the third-biggest lender by assets, canceled a plan to raise 50 million euros by selling new shares after poor demand from investors, which purchased only 1.4 percent of the stock for sale.

To contact the reporter on this story: Boris Cerni in Ljubljana at bcerni@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net

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