European Commission rejects Slovenian proposal to postpone sale of NLB by three years

European Commission rejects Slovenian proposal to postpone sale of NLB by three years
By bne IntelliNews October 27, 2017

The European Commission has rejected the Slovenian government’s proposal to extend the deadline for the privatisation of Nova Ljubljanska Banka (NLB) by a maximum of three years, reads the Ministry of Finance’s statement issued after Finance Minister Mateja Vranicar Erman discussed the issue with European Commissioner for Competition Margrethe Vestager on October 26.

Slovenia had committed to sell 75% of the bank by the end of 2017 in a restructuring plan that served as a basis for the European Commission's approval of state aid to the bank in the 2013 bailout. However, plans for an IPO were dropped in June amid a dispute over the pricing of the offer and an ongoing lawsuit over Yugoslav-era deposits in Croatia.

“The sale of 75% of Slovenia’s stake in NLB is an important commitment to ensure the bank’s long-term viability,” European Commission spokesman Ricardo Cardoso said, Reuters reported on October 26.

However, Slovenia objected to the Commission’s stance. “It is not acceptable for Commissioner Vestager's to postpone sales even with additional compensatory measures,” the ministry said.

Erman proposed at the meeting to postpone the sale of the state's share in the NLB (75% minus one share) for a maximum of three years.

Ljubljana wants to delay the sale of the bank, which was nationalised along with several other leading Slovenian banks in 2013, until the lawsuit with Croatia is resolved.

Croatia’s Privredna Banka Zagreb (PBZ) has sued the now-defunct Ljubljanska banka (LB) and its legal successor NLB over savings deposits from the Yugoslav era, and the case is still being considered in Zagreb. These deposits were repaid to Croatian savers by the Croatian state, which then authorised Croatian commercial banks to recover them in court. The liabilities are estimated at €350mn to €400mn. 

Slovenian officials fear that they will be unable to achieve an acceptable price for the bank while the case remains unresolved. In the previous attempt to sell NLB, Prime Minister Miro Cerar cancelled the IPO of the bank in June saying the price was too low. 

At the meeting, the Erman presented Ljubljana's basic position that for a successful privatisation of NLB, the risk arising from the transferred foreign currency deposits in Croatia needs to be minimised, since the reduction of the purchase price due to this risk is not acceptable. “This would imply that, due to an external objective circumstance, it is not possible to repay the taxpayers who have been invested in the bank's rehabilitation,” the ministry statement said. 

The ministry said that in exchange for this Erman expressed her willingness to agree on some additional compensatory measures which would limit the growth of the bank, but it would not significantly affect its operations.