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Sovereign Holding Could Assume Bad Loans from Banks, FinMin Says

Ljubljana, 05 July (STA) - The sovereign holding which the government wants to set up to manage state assets could assume bad loans from state-owned banks, Finance Minister Janez Šušteršič announced after Thursday's cabinet session. He stressed that the problems at banks appeared to be manageable for Slovenia.

The announcement comes after the cabinet debated at its session plans for establishing the Slovenian Sovereign Holding, which would take over the management role of the Capital Assets Management Agency and bring current state asset funds SOD, KAD and DSU under one roof.

Beyond this role the government wants to craft a strategy giving the new holding the power to manage bad assets of Slovenian state-owned banks in a bid to clean up their balance sheets and deal with the ongoing credit crunch, Šušteršič said.

The bill on the Slovenian Sovereign Holding is expected to be debated by the cabinet next week so that parliament can pass it before the summer recess and the holding can come to life in the autumn, he announced.

Šušteršic said under the bad loan scheme red-flagged loans or those expected to sour would be transferred to the holding at fair value.

This way banks would be cleansed of non-performing loans in one swoop instead of gradually getting their balance sheets in order through periodical write-downs as is the case now.

"This cabinet is under no illusion that the situation will fix itself," said Šušteršič, stressing that current data suggest that the scope of the problem was within boundaries that Slovenia can manage alone.

However, should the state be worse than it currently appears or should new risks arise, it can not be excluded that Slovenia would have to turn for aid from the European Stability Mechanism in the coming years, he said.

The government was also expected to review today the findings of the due diligence at state-owned NLB, the country's biggest bank, but Šušteršič announced that these were not available yet.

The minister reiterated that the government achieved its initial goal of stabilising the banking sector by providing fresh capital to NLB. Now it must attain its key objective - for banks to start financing business again, he added.

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