Slovenia Faces ‘Severe’ Banking Crisis in Recession, OECD Says [View all]

[dipsydoodle]

Source: Bloomberg News

Slovenia, hit hard by a boom-bust cycle and the euro area’s debt woes, faces a “severe” banking crisis if it doesn’t act quickly, the Organization of Economic Cooperation and Development said.

The Alpine nation should recapitalize “distressed, viable banks” while holders of subordinated debt and “lower-ranked hybrid capital instruments should absorb losses,” the Paris- based OECD said in a report today. State-owned banks such as Nova Ljubljanska Banka d.d. and Nova Kreditna Banka Maribor d.d. should be sold and non-viable banks should be wound down, it said.

“Limited equity markets and the backlog in the privatization program are hindering foreign direct investment, whose increase would help smooth corporate deleveraging,” the group of the world’s wealthiest countries said in the report. “An agreement on a list of public assets to be privatized or managed by a new sovereign holding is still lacking.”

Slovenian banks, burdened by rising bad loans and relying on financing from the European Central Bank, are at the center of investors’ worry the nation may follow Cyprus and other peripheral nations to ask for an international bailout.

Read more: http://www.bloomberg.com/news/2013-04-09/slovenia-faces-severe-banking-crisis-in-recession-oecd-says.html

---

Eurozone crisis: OECD warns Slovenia over bank debts - live

9.41 BST

Slovenia's bailout worries

The OECD's warning to Slovenia (see 9.04am) comes at an awkward time for the country, with speculation over a possible bailout swirling.

As Reuters puts it this morning:

Following last month's messy rescue of Cyprus, the country of 2 million perched on Italy's northeast border is facing intensifying market pressure while seeking funds to heal its state-owned financial sector.

Slovenia's banks, downgraded by Fitch last Friday, are still largely in public hands too.

One of the OECD's criticisms is that the Slovenian government hasn't yet agreed a list of public assets to be privatized or spun off.

http://www.guardian.co.uk/business/2013/apr/09/eurozone-crisis-german-exports-slovenia