Slovenian insolvency legislation is burdening the economy and deepening the bank industry’s woes by slowing the restructuring of companies, the central bank said.
The government needs to change the laws because owners are allowed to drag the process out even though they are highly indebted, Banka Slovenije, led by Governor Marko Kranjec, said in an e-mailed statement today.
“We can see problems in companies in an important segment of the economy,” the bank said. “The inability of owners to boost capital at troubled companies is causing an unnecessary wave of bankruptcies, which in turn affects business at banks.”
Slovenian banks, including the largest Nova Ljubljanska Banka d.d., will probably report a fourth consecutive year of losses for 2012 as more and more companies go bankrupt and banks pile up bad loans. The Adriatic nation, which was plunged into a political crisis over corruption allegations against Prime Minister Janez Jansa, may be forced to seek aid from the European Stability Mechanism, German weekly Wirtschaftswoche said Feb. 8 citing an unnamed European Union official.
The International Monetary Fund, the World Bank and other institutions support legislative changes since “quick settlements can produce positive consequences relatively quickly” after they are adopted, the central bank said.