Slovenia will not require EU bailout

Slovenia will not require financial assistance from the euro zone, the European Commission said yesterday, after the eastern European state unveiled the results of long-awaited stress tests of its troubled banking system.

With Slovenia desperately trying to avoid becoming another euro zone country to require a bailout, its government yesterday announced a total recapitalisation plan of €4.78 billion for its banking sector, which it said it will fund without outside help.

The stress tests of the country’s three largest banks, which are all fully or majority state-owned, revealed capital requirements of just over €3 billion, which will be funded by the state but which also involve a burning of junior bondholders to the sum of €440 million. The government plans to issue just over €900 million in bonds to help fund the capital injunction, along with about €2.1 billion in cash.

In addition, five smaller banks were ordered to raise €1.7 billion from private sources, with around €1 billion expected to be raised within the next six months.

Yields on Slovenia’s government bond yields fell to a nine-month low yesterday, as the total recapitalisation figure came in slightly less than the €5 billion that had been expected. Slovenia’s banking system is believed to be harbouring €7.9 billion in bad loans.

EU economics commissioner Olli Rehn said the tests had used a "credible methodology".