September 9, 2013 / 11:13 AM / 6 years ago

No sign of feared bank run in Slovenia on liquidation plan

* Two small private banks to be liquidated

* Slovenian banks nursing 7.5 bln euros in bad loans

* Chances of avoiding EU/IMF bailout hang in the balance

By Marja Novak

LJUBLJANA, Sept 9 (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, with banks closed for business on Saturday and Sunday.

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, 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.

“I’m not worried about my money because the state is still functioning,” said 43-year old Goran Andrejevic, who withdrew a small amount of money from a Probanka cashpoint. “I’m not thinking of placing my money elsewhere for now,” he said.

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.


Factor Banka and Probanka represent about 4.5 percent of the banking sector. 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.

“My confidence in the Slovenian banks is diminishing, though I have not had a bad experience with them so far,” Jelincic said on Monday morning in Ljubljana.

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

“The export growth figure is very encouraging and if the European recovery continues exports could grow further and might help Slovenia out of recession as early as this year,” said Marko Rozman, head of investment at the treasury sector of Dezelna Banka.

“Liquidation of the two banks is also a step in the right direction because it shows that Slovenia has started a long-delayed bank overhaul, which gives it a chance to avoid a bailout,” he said.

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.

Timothy Ash, head of emerging market research at Standard Bank, said avoiding a bank run could be key to averting a bailout.

“However, bank runs can often happen at very short notice, and are typically unexpected - you just wake up to find a long queue,” Ash said. ($1 = 0.7600 euros) (Editing by Matt Robinson/Ruth Pitchford)

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