Business News

Financial Experts Agree Banking Sector Needs Swift Measures

Ljubljana, 29 March (STA) - Former central bank governor Mitja Gaspari told Thursday's current affairs show Pogledi on public broadcaster TV Slovenija that in order to salvage banks, conflict of interest must eliminated, so that money would actually be spent on restructuring of banks. The process must be done quickly, he added.

According to Gaspari, who headed Banka Slovenije from 2001 to 2007, there are several ways to carry out the bad bank project.

He noted though that considering the economic forecasts for this and next year, it seems that all the urgently needed measures would need to be carried out in "extremely harsh economic conditions", which he believes will affect their efficiency.

Gaspari said he no longer believed in the good intentions of state bodies when it comes to restructuring of companies, "because behind this state interest, however defined, there are always some clearly expressed personal or party interests".

A question is whether the new holding in charge of this will be comprised of experts who will be independent, he said.

Commenting on the surge of the yield on the Slovenian 10-year bonds in the past week, Slovenian-born Fed economist Egon Zakrajšek said that the reason for this was the start of the financial crisis in Europe.

"But there are also some specific problems Slovenia has, which again are intertwined: A new government, straying from the clear path toward exiting the crisis set by (former Finance Minister Janez) Šušteršič in the previous government."

Zakrajšek believes the banking system needs to be fixed in a transparent way. He pointed to Sweden's bad bank model as a good example.

"Developing interesting theories on how to save banks with special Slovenian approaches is completely misguided," he said, adding that the country lacked time and money for that.

"It is essential that things are simplified and that the mentality, our philosophy from the last 20 years of rejecting the bases of liberal capitalism is abandoned."

Zakrajšek also said that regular stress tests, analysing projections of bad claims under various macroeconomic scenarios, would had given Banka Slovenije and other financial regulators many more opportunities to react to what had been going on.

None of the solutions for the banking system or the versions of the bad bank is optimal, but the "worst you can do is to try to switch trains at high speed", he said.

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