High Bad Loans Limit Credit Growth in Slovenia, Jazbec Says

  • Level of bad loans dropped to 11.1 % at the end of July
  • Country needs to attract venture capital to finance SMEs

Slovenian banks still hold a high level of non-performing loans, restricting credit to an economy that’s recovering at a faster pace than previously forecast, central bank Governor Bostjan Jazbec said.

More than 70 percent of bad loans are from small and medium-sized companies, Jazbec said at the business forum in the capital Ljubljana. The level of loans 90 days overdue dropped to 11.1 percent at the end of July from 11.6 percent in the first half of the year, the central bank said on Sept. 16.

Slovenian banks, including the largest, Nova Ljubljanska Banka d.d., almost pushed the Adriatic country into an international bailout, prompting the government to rescue them with a 3.2 billion-euro (3.56 billion) capital boost in December 2013. The export-dependent economy is set to grow 2.7 percent this year, the government economics institute said, revising its previous forecast of 2.4 percent advance.

“Repairing the balance sheets of the banking sector in Slovenia involves two main elements: restoring capital adequacy and addressing the problem of a large volume of non-performing loans,” Jazbec said.

Due to high failure level of small and medium-sized enterprises, the bank industry alone can’t be expected to meet their financial needs, according to the central bank governor, who’s also a member the Governing Council of the European Central Bank.

“Elsewhere, venture capital investments fill the gap that the banking sector can’t,” Jazbec said. Since the venture capital market in Slovenia is “thin, we need to explore methods for attracting higher volume of venture capital investments from foreign sources,” he said.

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