Cabinet approves bank restructuring programme

The cabinet approved a proposal on October 22 for the first phase of restructuring of some state banks. The proposal deals especially with the restructuring of VÚB and SLSP, and aims to establish a special consolidation agency that would take over some of the classified loans of the state-controlled banks.

In the first phase of restructuring, the government would increase the registered capital of SLSP and VÚB to 4.9 and 10.2 billion Slovak crowns, respectively. The state will obtain funds for this financial injection from the National Bank of Slovakia. Simultaneously, 80% of classified loans of the two banks should be transferred to a special agency or to Konsolidačná Banka (KBB). VÚB would transfer classified loans totaling 45 billion crowns, while SLSP will shift 22.8 billion crowns in bad loans to this new agency. VÚB and SLSP would set aside provisions for the remaining 20% of classified loans in their portfolio.

The special consolidation agency should be established by November 15. The Finance Ministry will control the biggest stake in this agency, while the KBB, VÚB, SLSP and state bank IRB should also participate. The agency is expected to complete its work in three to five years.

The cabinet-approved proposal does not address the restructuring of IRB, which has been under a caretaker administration since December, 1997. Because a bank can be under the administration of the central bank for a maximum of two years, a plan for the restructuring of IRB must be worked out soon.

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