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Three state banks divest bad loans

Finance Minister Brigita Schmögnerová on December 15 announced plans for the country's state controlled banks scheduled for privatisation to get rid of most of their bad loans by the end of the year. She said Slovenská Sporiteľňa, VÚB Bank and IRB would transfer some 76 billion crowns ($1.82 billion) worth of bad loans to the state bank Konsolidačná Banka and the newly created state agency Slovenská Konsolidačná.

The government has announced plans to sell stakes in the three banks to a foreign partner in 2000, but Schmögnerová told a news conference the sales may not take place until the end of 2000 or the beginning of 2001.

"By the end of the year, IRB, Sporiteľňa and VÚB should have an eight percent capital adequacy ratio...and the share of bad loans should fall to around 20% in all three," Schmögnerová told journalists.

The planned operation is a part of a scheme designed by the government to improve the banks' balance sheets before sale. In mid-December, the state used some 17.8 billion crowns to boost the basic capital of Sporiteľňa, VÚB and the former monopoly insurer Slovenská Poisťovňa, which in turn deposited the new capital in IRB, allowing it to get rid of a caretaker administration by the central bank.

Schmögnerová said VÚB would get rid of about 45 billion crowns of classified loans, Sporiteľňa of 23 billion crowns and IRB 8.8 billion.

Konsolidačná Banka and Slovenská Konsolidačná should be able to recover only about a quarter of the bad loans' book value through collection, capitalisation, securitisation or liquidation of non-payers, she added. The government would provide guarantees on the transferred bad loans.

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