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Proportion of non-performing loans is up

THE ECONOMIC crisis has reduced the ability of some debtors to repay their loans to banks, but large banks in Slovakia do not report significant increases in non-performing loans.

THE ECONOMIC crisis has reduced the ability of some debtors to repay their loans to banks, but large banks in Slovakia do not report significant increases in non-performing loans.

“From the viewpoint of business clients, the current situation is defined by a slowdown in new-loan issuance and the worsening of the financial situation of some clients,” Tatra Banka spokesperson Boris Gandel told The Slovak Spectator.

This has resulted in a reduced capacity by clients, especially those from sectors hit hardest by the crisis, to pay back their loans. In particular, companies lack money to finance their ordinary operations because of their own customers’ failure to pay. This results in an increased demand for short-term loans.

“The small proportion of failed loans to total loans, the so-called non-performing loans ratio, was 2.72 percent as of June 30 at Tatra Banka, confirming the stable high quality of the bank’s loan portfolio,” said Gandel. The average non-performing loans ratio for the whole Slovak banking sector was 4.39 percent in June.

At the end of June banks in Slovakia reported non-performing loans totalling almost €1.2 billion, roughly 50 percent more than one year ago, according to the Hospodárske Noviny daily.


Slovakia’s biggest bank, Slovenská Sporiteľňa (SLSP), also reports no significant problems with non-performing loans.

“The number of loans not being paid back has been increasing moderately during the [most recent] period, but it is still very low,” Robert Hanzel, director of the credit risk control division for retail at SLSP, told The Slovak Spectator. “This is a tiny percentage of the total volume of loans provided.”

If a client finds himself in a situation when he is not able to meet his obligations, the bank always searches for a solution, Hanzel said.

Consolidation is one way to mitigate the loan burden of a household. The bank proposes a specific solution to the client after a consultation, according to Hanzel.

Another option is to reduce loan instalments for a maximum of six months. However, SLSP clients can utilise this opportunity only once during the duration of each loan.

Instalments are reduced once the bank and the client agree on the level of reduction.

“But for the client too it is good if the instalment does not fall below 30 percent of the original instalment,” said Hanzel. “This way the client will maintain the habit of paying at least a portion of his loan and a sense of responsibility. Afterwards he returns much more easily to the normal [repayment] regime.”

Apart from consolidation or temporary reduction of instalments, debtors can also prolong the period over which they repay their loan, for example from 20 to 30 years, thus achieving a reduction in monthly instalments.

In some cases it is also possible to sell the real estate and settle the loan earlier or find another person to take the real estate along with the loan off the bank’s hands.

“If a client does not want to cooperate with the bank, there remains for him only worse solutions,” said Hanzel.


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