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Govt Adopts Bill Establishing a Bad Bank

Ljubljana, 20 September (STA) - The government adopted on Thursday a bill setting up a bad bank in a bid to purge bank balance sheets of soured loans and kick-start lending. The operation will cost an estimated EUR 4bn in state guarantees, Finance Minister Janez Šušteršič explained.

"From what we know at present, this is the upper estimate of the value of bad loans in the principal systemic banks in Slovenia," according to Šušteršič.

Under the bill, banks' non-performing loans will be taken over by a special fund owned by a state-owned company, a special-purpose vehicle for bad loans.

The fund will issue bonds backed by state guarantees, which the banks will receive in exchange for handing over the bad loans.

This will make it possible for the banks to obtain financing from the European Central Bank (ECB), according to the minister.

Bad loans will not be transferred automatically, the process will be triggered at the request of the special-purpose vehicle, the banks themselves or the central bank.

The umbrella company will have a seven-member board with three executive and four non-executive directors, Finance Minister Janez Šušteršič explained after the cabinet session.

The non-executive directors will be appointed directly by the government and will then name the executive directors.

Parliament is expected to pass the bill at the plenary session next week.

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