Slovenia’s failure to privatise its largest lender Nova Ljubljanska Banka (NLB) by the December 31, 2017 deadline means the aid the government granted to the bank in 2013 was unlawful, the European Commission (EC) said on April 6. Ljubljana also did not propose a divestiture trustee to sell NLB’s foreign Balkan subsidiaries by November 30, 2017.
Slovenia had committed to sell 75% minus one share of the bank 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 of several major banks, but scrapped a planned IPO last June amid a dispute over the pricing of the offer and an ongoing lawsuit over Yugoslav-era deposits in Croatia. Now, it is unlikely the sale of the bank will happen in the near future, as the country will hold parliamentary elections in May or June, and a significant number of Slovenians heavily oppose sales of state-owned assets.
After the failure to sell off NLB, the EC said it plans to take action against Slovenia in line with Article 108(2) of the Treaty on the Functioning of the European Union (TFEU). The EC raised serious doubts as to the compatibility of the aid with the internal market based on the information available at this time, and warned that should the aid be found to have been unlawful, NLB may have to pay it back.
As an initial step, the EC has asked Ljubljana to provide information on the measures to support NLB within one month.
The letter follows the EC’s January 26 announcement that it had opened an in-depth investigation to assess whether new measures proposed by the Slovenian authorities regarding the restructuring of NLB sufficiently compensate for delaying the bank's sale beyond the end of 2017.
On December 21, the Slovenian authorities proposed significantly extending the sales deadline, as well as the appointment of an independent trustee that would exercise the state's shareholder rights until the sale has been completed, a measure intended to allay concerns over corporate governance.
The EC’s April 6 letter noted that Slovenia had asked to launch the divestment of its shareholding in NLB to 25% + 1 share in 2018 and to complete it in 2019.
The Slovenian ministry of finance reacted to the EC’s letter, saying that as it had pointed out in January, an in-depth investigation in such cases is a completely normal procedure and does not prejudge the final outcome.
“Slovenia responded to the January letter of the European Commission in early March. In this response we addressed all the main concerns of the Commission, answered additional questions, and with additional arguments repeated the substantive reasons for the change of commitments. Conversations with the commission continue even after the March response of Slovenia. Our goal is to reach an agreement with the commission regarding the deadline for privatisation and compensatory measures,” the ministry said on April 6.
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