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State to guarantee loans deemed riskier

THE STATE is working on a plan to guarantee business loans that commercial banks consider risky. This is the outcome of a meeting on December 15 that Prime Minister Robert Fico and Finance Minister Ján Počiatek held with representatives of the Slovak Bank Association (SBA).

THE STATE is working on a plan to guarantee business loans that commercial banks consider risky. This is the outcome of a meeting on December 15 that Prime Minister Robert Fico and Finance Minister Ján Počiatek held with representatives of the Slovak Bank Association (SBA).

“It would be unfortunate if, for example, a company that has been on the market for 10 or 15 years had to close just because banks are being cautious with loans for companies in the automotive sector,” Fico said, as quoted by the Sme daily.

The Finance Ministry announced that the initiative is in cooperation with 11 major local banks, representatives of Eximbanka and the state-run Slovak Guarantee and Development Bank (SZRB).
Both sides are to negotiate the specifics by January 15, 2009, the SITA newswire reported.
SZRB and Eximbanka already provide similar products, though on a smaller scale.

Fico said that the initiative will simplify the administration related to provision of state guarantees for business loans across the Slovak banking sector. Nonetheless, the cabinet said it does not intend to back all the loans.

And the prime minister did not specify the limit up to which the state would guarantee.
Počiatek added that the initiative will not increase the national deficit.

However, its potential impact has yet to be examined. Regina Ovesny-Straka, head of the SBA, stated that the banking sector is ready to participate. She is convinced that the parties will quickly come to an agreement.

“We appreciate that the state is able to give guarantees. Lower risk will mean better prices,” she said, according to the Trend weekly.

On January 15, Fico will discuss the possible use of local banks’ superfluous liquidity for state projects, such as energy, highways and projects related to housing and reducing energy consumption.
These would be short-term projects whose financing will not burden banks, he said.

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