Bloomberg News

ECB Loans to ‘Ease Liquidity’ at Banks, Banka Slovenije Says

December 20, 2011

Dec. 20 (Bloomberg) -- Slovenian banks, including Nova Ljubljanska Banka d.d., the country’s largest, are relying on loans from the European Central Bank to ease liquidity as the stability of the lending industry worsens.

“Three-year long-term loans from the ECB will ease the liquidity risk,” the country’s central bank, known as Banka Slovenije, said in an e-mailed statement today. “The stability of the banking system has worsened in the first nine months of the year on increased credit and refinancing risk.”

The ECB invited euro-area banks to place orders for its first tranche of unlimited three-year loans, an attempt to keep credit flowing to the 17-nation economy during the sovereign debt crisis. The ECB has also widened the pool of collateral banks can use to secure the funds. Loan bids must be submitted by 9:30 a.m. tomorrow.

Banks in Slovenia, which joined the euro in 2007, are still reeling from the 2009 recession and their cash reserves may be further pressured as the export-dependent economy slides into another slump. Bad-loan provisions at banks in the former Yugoslav nation surged 40 percent in the first 10 months from a year earlier to 706 million euros, the central bank said Dec. 7.

Nova Ljubljanska and Nova Kreditna Banka Maribor d.d., the two largest banks that are majority-owned by the government, will probably report full-year losses for 2011 on mounting loan- loss reserves. NLB said in October it had put 264 million euros ($346 million) aside to cover asset writedowns and bad loans, while Nova Kreditna posted a 4.4 million-euro loss in the nine- month period, its first since a 2007 initial public offering.

The worsening outlook for Slovenian banks is “of particular concern,”, Christopher Pryce of Fitch Ratings said in a Dec. 8 interview. The ratings company has estimated banks in Slovenia need as much as 3 billion euros of fresh capital.

NLB is seeking to raise 400 million euros to improve its capital ratio by mid-2012. The European Banking Authority estimated on Dec. 9 that the lender needs 320 million euros, up from a previous estimate of 297 million euros.

--Editors: Jeffrey Donovan, Eddie Buckle

To contact the reporter on this story: Boris Cerni in Ljubljana at bcerni@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net


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