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No Sign Of Feared Bank Run In Slovenia On Liquidation Plan

posted 11 Sept 2013, 07:02 by Mpelembe   [ updated 11 Sept 2013, 07:03 ]

Slovenians shrug off the liquidation of two small banks, confounding fears of an immediate run on deposits that could torpedo the government's efforts to avert an international bailout.

 LJUBLJANASLOVENIA (SEPTEMBER 9, 2013) (REUTERS) -  Slovenians shrugged off the liquidation of two small banks, confounding fears of an immediate run on deposits that could torpedo the government's efforts to avert an international bailout.

Slovenia's central bank saved news of the liquidation of privately-owned Factor Banka and Probanka for Friday evening (September 6), with banks closed for business on Saturday (September 7) and Sunday (September 8).

Central bank governor Bostjan Jazbec conceded the possibility of a bank run, with the country's prospects of becoming the next euro zone bailout applicant hanging in the balance.

But as banks reopened on Monday (September 9), there were only a handful of clients at the Ljubljana branches of Factor Banka and Probanka.

There was no sign of queues at other banks either.

"The confidence (in Slovenian banks) is such that we might as well all go abroad (to use foreign banks)," said self-employed business owner Marli Macek while visiting a Probanka branch in Ljubljana.

Factor Banka and Probanka represent about 4.5 percent of the banking sector and the government has guaranteed deposits in full to the tune of 1 billion euros.

Nevertheless, retiree Dusa Jelincic said she was looking to sell or transfer her share portfolio, which is managed by Factor Banka, to another bank.

"I don't expect anything (to happen). I would like to sell my shares (portfolio) though, now that the whole situation is up in the air. If things go well, good, and if not... I will see what happens," said pensioner from LjubljanaDasa Jelincic.

"The confidence in banks is bad and it will get even worse," entrepreneur from the town of Kamnik who has a business account at Probanka, Sebastjan Pograjc, told Reuters on Monday.

In a small sign of economic recovery, Slovenia's statistics office reported on Monday that exports - the chief driver of the economy - were up 7 percent in July year-on-year.

Slovenia is locked in its second recession since the onset of the global crisis in 2008, when exports hit a wall, driving up bad loans and exposing a culture of cronyism in an economy 50-percent controlled by the state.

The banking sector is suffocating under an estimated 7.5 billion euros ($9.9 billion) in bad loans, most of them held by state-run banks in the country of just 2 million people.

Analysts welcomed the export data and the bank liquidation, which will be carried out over several months.

"Of course, the depositors and clients of these two small banks are going to leave the bank in the next couple of months in an orderly fashion, and we can still expect that there's going to be more people now switching from Slovenian banks to foreign banks. Just for safe(ty), for any case," chief economist at Alta Invest investment firm told Reuters.

After a delay of several months pending external stress tests, the government says it plans to start transferring bad loans to a state-owned "bad bank" next month.

"This is a message towards the European CommissionEuropean Central Bank, and the troika itself, that yes, Slovenia is finally going to act, finally implement some harsh measures, maybe shocking measures, but needed measures. And with that they would like to convince troika to postpone bailout or maybe even to get to tap into the capital markets which would avoid the bailout completely. But I think this is (coming) in the very last minute so I think it's going to be very hard to restore confidence that quickly," Stanovnik said.