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Jasovic: NLB Bank Would Need EUR 400-600M in Fresh Capital

Ljubljana, 08 July (STA) - NLB will need much more fresh capital than the currently debated EUR 250m, the chairman of Slovenia's top bank, Bozo Jasovic, told the parliamentary Finance and Monetary Policy Committee, which debated the supply of fresh capital for NLB on Thursday upon the request of the opposition People's Party (SLS).

In the coming years between EUR 600m and EUR 700m in hybrid capital will be due for payment and in order to replace this with top quality capital, the bank will need much more money than the EUR 250m, Jasovic said, noting that more realistic figures stood between EUR 400m and EUR 600m.

He listed three reasons for rising the original sum the state-owned bank reportedly needs. First, due to changes in the EU legislation, European banks will require more top quality capital to retain the existing scope of business.

This will become evident already on 23 July, when the Committee of European Banking Supervisors publishes the results of stress tests of 91 EU banks and NLB with its 6% capital adequacy will be at the bottom, he said.

This can hurt the bank's credit rating and ability to get loans abroad, which will lead to poorer business results and hurt NLB's ability to provide loans. Jasovic noted that most European banks have already received capital boosts.

The second reason is that the crisis of the financial sector is continuing. The number of companies which are late in their payments is rising, while some are filing for bankruptcy, he said.

The third reason, which Jasovic says is still hypothetical, is the need for fresh capital in case credit activity starts to rise again.

The banker reiterated that the bank's strategy until 2015 focused on consolidation rather than expansion. To implement it, the bank therefore does not need any fresh capital, as it will get money form selling off some investments.

Jasovic said that the planned capital increase between EUR 200m-250m will only be a first urgent step. To secure the bank's long term stability, the state should provide between EUR 400m and EUR 600m, while the bank would take care of the rest.

That the planned capital increase at NLB, whose form remains unclear, is a major issue is evident from a decision of the upper chamber of parliament to meet for an emergency session to debate it on Tuesday. At the same session, the National Council could veto the bill on Slovenia's aid to Greece as part of the EU aid package.

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