“Reducing the share of nonperforming assets in banks and ensuring capital adequacy are key measures to strengthen the stability of banks and, consequently, improve financing conditions. With the aim of implementing these measures, the Bank Assets Management Company has been established” —SLOVENIAN PRIME MINISTER ALENKA BRATUŠEK
Public sector under pressure
SAVI NG S LOV E NI A’ S B ANKI NG SYST E M
SLABA BANKA BANK ASS E T MANAGE ME NT COMPANY
The Slovenian economy was hit hard by the financial crisis with a drop in real GDP of 11% between the pre-crisis peak and 2013 – the largest output loss in the euro zone after Greece. Trust in the economy was low; government bonds were trading only 200 basis points higher than in Spain and Italy. As trust waned and the economy contracted, banks reeled under the weight of non-performing loans, which reached a staggering amount of +20% of the total loans. “Slaba banka” – meaning “bad banks” – became a recurring theme in Slovenian news coverage. At the end of 2012, three systemic banks were in serious risk of collapse, so in order to save the country from financial catastrophe, the government established the Bank Asset Management Company (BAMC). BAMC’s mandate was twofold: carving out non-performing loans from government-owned systemic banks and restoring the highest possible amount of taxpayer money by actively managing the non-performing loans. A comprehensive task was at hand: to oversee the transfer and manage the restructuring of the loans as well as to design and set up the necessary processes and infrastructure for BAMC to become a highly effecAs trust waned and the tive organisation. economy contracted, the
Slovenian banks reeled under the weight of nonperforming loans, which reached a staggering amount of +20% of the total loans.
SETBACKS AND SUCCESSES: THE TRANSFER BEGINS
The transfer of EUR 3.3 billion in non-performing loans took place on December 20, 2013, and included two of the three systemic banks – Nova Ljubljanska Banka and Nova Kreditna Banka Maribor – but not without a few initial setbacks. Early in the process, conflicting interests between the European Commission, the Slovenian government and the banks caused a number of issues in terms of prices and the selection of assets from the banks’ books. Once the prices and the list of assets were locked in, the transfer was scheduled in multiple tranches so BAMC would receive loans in manageable portions. However, less than a month before the first credit transfer, the Bank of Slovenia and the Ministry of Finance unexpectedly announced that the transfer was to be completed in one large asset turnover. Both BAMC and the failing banks, however, would be unable to handle this abrupt transfer. Something had to happen, and it had to happen fast. Extremely intense months followed, during which new contracts had to be drafted and negotiated with the banks. In the end, the assets were transferred at the scheduled time, and Slovenia’s two largest banks were successfully rehabilitated. The third systemic bank will transfer its assets in Q3 2014. In parallel to the transfer, the necessary organisational processes and infrastructure have been put in place. To date, approximately 60 top-tier employees have been hired, and intense financial restructuring and operational improvement activities for some of the largest companies in Slovenia are now taking place.
Public sector under pressure