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Results of stress tests – who will take the responsibility?

European Commission and the Slovenian Finance Minister Uroš Čufer and the Governor of the Bank of Slovenian Boštjan Jazbec, revealed the results of stress tests for Slovenian banks at a press conference earlier today. The stress tests were a necessary precondition of the European Commission prior to the transfer of bad assets on banks’ claims to the so-called bad bank.

Tests have revealed 4,778 billion of bad debts t in eight Slovenian banks. Emergency recapitalization of these banks will cost the country 3,012 billion euros. By far, the most fresh capital is needed by NLB, 1.551 billion, followed by NKBM with 870 million and Abanka with 591 million. Banka Celje, Gorenjska banka, Hypo Alpe-Adria Bank, Raiffeisen Banka and UniCredit Bank Slovenia, which have a total of a billion of stranded investments, will have to seek fresh finance either on the market, their parent companies or in significantly better business performance. The recapitalization of the banks by the state will be considered only if they have exhausted all other options.

The government already announced two new measures in the banking sector. Further capital increase of Factor Bank and Probank which are already in the process of liquidation and capital increase of 200 million for the Bad Bank.

With the implementation of the planned measures, the gross government debt will rose to 75.6% of GDP, taking  into account the 2.5 billion Euros in the government’s single treasury account the net general government debt amounted will amount to 68.5% of GDP. Government debt will still remain below the EU-28 (85.1%) or EA-17 (90.6%) average.

After the public presentation of the results, European Commission Vice President Olli Rehn, pointed out that there still remains much work to correct the economic imbalances in Slovenia. At the same time, he is pleased to note, that the results showed that Slovenia can solve its problems alone and does not need financial aid from its European partners.

Sources:

http://www.bsi.si/library/includes/datoteka.asp?DatotekaId=5427

http://europa.eu/rapid/press-release_MEMO-13-1142_en.htm

 

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