IMF report: Slovenian banks to require $1.3 billion of capital as bad loans increase

200px-International_Monetary_Fund_logo.svgThe International Monetary Fund said in a Wednesday report that the three largest banks in Slovenia, which has been plagued by financial troubles, will require $1.3 billion of capital as the number of bad loans rises.

Bad debt accounted for 20.5 percent of total loans last year at Nova Ljubljanska, Nova Kreditna Banka Maribor and Abanka Vipa, up from 15.6 percent in 2011. Last year, the Slovenian economy contracted 2.3 percent, and the IMF said it would likely shrink two percent in the coming year, Bloomberg reports.

“A negative loop between financial distress, fiscal consolidation and weak corporate balance sheets is prolonging the recession,” the IMF said, according to Bloomberg. “Lenders need to be substantially recapitalized…”

Alenka Bratusek, Slovenia’s newly confirmed prime minister, and her administration have vowed to increase bank capital by as much as $5.2 billion and to reconcile the budget gap.

“Financing requirements are particularly pronounced in summer, with bank recapitalization needed soon and a large 18-month T-bill coming in June,” the IMF said, adding that Slovenia will need to borrow nearly $4 billion this year and a large portion of the loan should come from external sources, Bloomberg reports.

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