The National Assembly will decide on the changes at the extraordinary plenary on Friday. The matter is pressing since NLB, Slovenia's biggest bank, needs to raise its Core Tier 1 capital to 9% by the end of June in line with the demand of the European Banking Authority (EBA).
The government-sponsored motion will enable the bank to issue contingent convertible bonds (CoCo bonds) which may be converted into equity once the capital adequacy of the bank falls below a certain level, Finance Ministry State Secretary Dejan Krušec told MPs. He would meanwhile not say who would buy the bonds and when they would be converted into shareholding. "This is a temporary solution. The priority is the deadline set by the EBA," he conceded.
This led Matevž Frangež of the opposition Social Democrats (SD) to infer, based on media reports, that the bonds would be bought by the Belgian co-owner of NLB. "We'll literally give away part of NLB as a gift to KBC, raising its share first to 36% and after the conversion of bonds to 55%," he said.
Alenka Bratušek of the opposition Positive Slovenia (PS) also understood that the bonds would not be bought by the state, which means a change in the ownership structure of Slovenia's No. 1 bank. "You don't have the discretion to change the ownership structure," the MP told the coalition. Krušec's answer to the many questions about the recapitalisation of NLB was that talks were being conducted on a daily basis between the European Commission, NLB, Slovenia's central bank and EBA through it, the EBRD as well as KBC. Asked about the bonds' yield, he said that the price had not been finalised but that it would be such as not to represent unallowed state aid. He would not give further details, citing the interest of the negotiations and Slovenia's position. Vice-Governor of Banka Slovenije Darko Bohnec echoed the belief that the solution was a temporary one that would allow the implementation of a reserve scenario of a capital hike at NLB by 30 June as there was not enough time for recapitalisation based on government strategic guidelines.
The central bank official did not think that this temporary solution was prejudging the final one. The state has the obligation to follow the bank as owner, there is no question about it, he said. Bratušek wanted to know how long this provisional solution would last and how it would reflect on the budget, but Krušec assured her that there would be no affect on the budget deficit. He pointed to the government's decision to reduce the state shareholding in banks to 25% plus one share, but SocDem MP Frangež said that this now was just a phase in the process to the state's full withdrawal. Reservations about the new bonds were also expressed by the state-run Capital Assets Management Agency (AUKN) with its board member Marko Golob noting that the hybrid instruments were virtually impossible to sell at the moment.
A regular recapitalisation would also force the other owners to invest their money into NLB, Golob said, adding that that would be a better solution than "some worthless financial instruments", while he also believes that the EBA could wait for another week. After the opposition walked out, the committee also backed decrees on the management of state equity in NLB and NKBM that would enable the government to manage the shareholdings directly. The solution would enable fast implementation of recapitalisation procedures without delays by lengthy procedures at AUKN, Krušec said. The committee also agreed with an increase in excise duty for cigarettes on 1 July, followed by two more rises over the next six months, and with the abolishment of the Public Procurement Agency on 30 June.
SOURCE: The Slovenia Times
