European Commissioner Olli Rhen said Thursday Slovenia will not need a bailout, confirming that the country will be able to recapitalize its ailing banking sector without international assistance.
Slovenia’s central bank announced the result of European Union supervised bank stress tests on Thursday, which revealed that banks will require EUR4.8 billion in extra capital to cover bad debts.
Slovenia’s central bank Governor Bostjan Jazbec said the country’s three largest state-owned banks - NLB, NKBM and Abanka - will need EUR3 billion. Five other smaller banks will need an additional EUR1 billion in funds.
The central bank said that the operation to clean up the banking sector will increase the country''s national debt to 75.6% of gross domestic product.
Prime Minister Alenka Bratusek''s government has already set aside EUR4.7 billion for recapitalizing the banking sector, including EUR1.2 billion of public funds.
Finance Minister Uros Cufer said Thursday the government plans on raising an additional EUR1 billion through a debt auction. The government can also impose haircuts on bond holders to raise another EUR500 million.
EU Economic Affairs Commissioner Olli Rehn said the results of the stress tests showed that Slovenia could “proceed with the repair of its financial sector without turning to her European partners for financial assistance."
Jeroen Dijsselbloem, the president of the eurogroup of finance ministers also welcomed the results, saying “the Slovenian authorities will use their own sovereign capacity to adequately cover the final capital needs of the banking sector.”
The yield on Slovenia’s 10-year bonds fell to a nine month low of 5.34% as markets digested news that the country would avoid a bailout, down from 5.6% on Wednesday.
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