The Slovenian government is considering measures to protect state-owned equity in Nova Ljubljanska banka dd after the lender decided to settle several Yugoslavia-era deposit claims in Croatia, The Slovenia Times reported Feb. 22, citing Slovenian Prime Minister Miro Cerar.
The government is concerned that the payments made by NLB could result in contingent liabilities potentially amounting to hundreds of millions of euros, the newspaper noted. The contingent liabilities were one of the reasons why Slovenia decided to delay the privatization of the lender, violating a deadline agreed with the European Commission in exchange for the approval of 2013 state aid for the country's banking sector.
Cerar refused to provide information about potential actions the government might take but noted that the payments were not authorized by the government, The Slovenia Times said. Slovenian President Borut Pahor's financial adviser, France Arhar, called on the bank's management to resign over the payments, SEENews wrote the same day.
NLB paid a total of €813,000 to Zagrebacka Banka d.d. and Privredna banka Zagreb d.d. following two Croatian court rulings, SEENews said. The Slovenia Times noted that NLB paid one of the claims, and the other was subject to a debt enforcement procedure. The Slovenian lender reportedly decided to settle the payment to avoid potential damage to its Croatian business, which includes leasing, factoring and real estate operations.
Following the settlement, NLB could face a string of similar claims and may need to set aside additional provisions, which would reduce the bank's capital adequacy, according to The Slovenia Times. The value of the Yugoslav-era deposits amounts to €175 million, plus default interest of more than that amount, the newspaper noted.
The dispute over the deposits dates back to the breakup of Yugoslavia in 1991. Following the breakup and the bankruptcy of Ljubljanska Banka, the defunct bank from which NLB originated, the lender's deposits in Croatia were transformed into public debt and later paid out to LB clients via Privredna Banka and Zagrebacka Banka.
The two lenders later took NLB to court on behalf of the Croatian government, with final court rulings reached in three out of 15 cases. Slovenia has claimed from the beginning of the dispute that the Ljubljanska Banka deposit claims are part of succession matters between the two countries following the breakup of Yugoslavia, and that NLB is not liable for them, The Slovenia Times noted.