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Minister Says NLB Has EUR 3BN of Bad Claims, But Most Can Be Reclaimed

Ljubljana, 29 June (STA) - Finance Minister Janez Šušteršič has disclosed that the group around the state-owned NLB bank has around EUR 3bn worth of bad claims, but added that most of these will probably be reclaimed, although at some kind of discount.

While explaining for Friday's edition of business daily Finance that the bad claims category included loans that are being repaid with a delay exceeding 90 days, the minister said that the main problem was the difference between the exposure and the actual value of insurance on the claims.

This gap will be known soon, Šušteršič said, while refusing to speculate on its size or the amount of money the largest Slovenian bank will need for long-term stability.

Several models for a solution are being examined presently, including the German model, which saw banks transferring risky claims or part of investments at market value to a special fund in exchange for interest paying bonds that provide balance sheet relief.

The costs of restructuring are spread out over a period of 20 years, with the state taking over the risk of having to sell banks' assets at a price lower than the estimated value.

The second option is the restructuring of the bad investments within the banks themselves, but little has been done in this respect in Slovenia, the minister said, adding that a combination of both solutions will be necessary.

Touching on the role of KBC, the second-largest NLB shareholder, Šušteršič said that the Belgian bank changed its approach significantly in recent weeks after its investment in NLB was initially slated for sale.

KBC, which needed state aid in 2009, is still waiting for a nod from the European Commission to be able to stop the sale, but the minister said that assurances have been received that Brussels is ready to accept an agreement.

Šušteršič assessed Slovenia as being in "a kind of transitional group" among European countries - it was not mentioned in debates on Greece, Ireland, Portugal and Spain, but it is also not among countries where problems are not likely to arise under any circumstance. He feels that this year will show which group Slovenia belongs to.

While claiming that no significant new borrowing will be necessary, as Slovenia still has enough reserves from previous rounds of fund-raising, the minister said that "a minor loan", secured with a bond issue, will be necessary before the end of the year.

Meanwhile, in a separate interview for the weekly Mladina, Šušterčič assessed that the EBRD estimate that Slovenia's economy would shrink more than forecast by government think tank IMAD is not materialising so far and that it does not seem that a new supplementary budget will be necessary.

Touching on the possibility of a VAT hike, he said that remains the last resort and cannot be the main solution.

He argued that a three percent raise would have reduced the budget deficit by a similar amount as was achieved by the austerity measures, but that this would not exclude the possible need to introduce the same measure next year.

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