January 29 (SeeNews) - The European Commission said it has opened an in-depth investigation to assess whether new measures for restructuring of Nova Ljubljanska Banka (NLB) proposed by Slovenia sufficiently compensate for delaying the bank's sale beyond end-2017.
The partial sale of Slovenia's shares in NLB is a key commitment to ensure NLB's long-term viability, on the basis of which the Commission was able to approve significant state aid of up to 2.32 billion euro ($2.9 billion) to NLB in December 2013, the Commission said in a statement on Friday.
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"In May 2017, Slovenia requested a gradual sale of its shares in NLB in two tranches, which the Commission approved. However, after putting the sale of NLB on hold in June 2017, Slovenia did not complete the sale of a first tranche of its shares in NLB before the end of 2017, nor did Slovenia nominate a trustee to comply with the alternative commitment of divesting its Balkan subsidiaries," the Commission noted.
It explained that since Slovenia failed to comply with its commitments, the aid granted to NLB in 2013 has not been lawfully implemented. Furthermore, the Commission said it has doubts that alternative measures proposed by Slovenia in December 2017 can be considered equivalent to the country's original commitment.
"Slovenia has proposed changes to its commitment to sell 75% of its shares in NLB and has missed a deadline under its existing commitment. It is the responsibility of member states to comply with their commitments," said commissioner Margrethe Vestager, in charge of competition policy.
"At this stage, we have doubts that Slovenia's new proposal is equivalent to its original commitment, which is why we have opened an in-depth investigation. We have to make sure that NLB, which has received significant state aid, is viable in the long-run, also for Slovenian taxpayers. And we have to ensure equal treatment of all EU countries. We will continue to work constructively with the Slovenian authorities over the course of this investigation," Vestager added.
The EC also explained that on December 21, 2017, the Slovenian authorities formally notified it of a new commitment package to replace its existing commitment on the sale of 75% of its shares in NLB. This proposal foresees a significant extension of the sales deadline and proposes the appointment of an independent trustee that would exercise the state's shareholder rights until the sale has been completed.
Finally, Slovenia proposes that all other existing commitments cease to apply as of December 31, 2017.
NLB is the largest Slovenian banking group and had a balance sheet of 12 billion euro at the end of September 2017. It has received three state recapitalisations, one of 250 million euro in March 2011, one of 383 million euro in July 2012. Furthermore, NLB benefitted from a transfer of impaired assets to a state-owned bad bank with an implied aid element of 130 million euro.
In December 2013, the Commission approved under EU state aid rules 2.32 billion euro in state aid to NLB – equivalent to 20% of the bank's risk weighted assets as on December 2012.
The Commission took its 2013 decision on the basis of the bank's restructuring plan and associated commitments. As a crucial part of this restructuring plan, Slovenia committed to sell a 75% minus 1 share of NLB by the end of 2017, in order to ensure that the state would no longer influence NLB's day-to-day business.
In May 2017, the Commission accepted a request from Slovenia for a more gradual sale, whereby Slovenia committed to sell (at least) 50% of its shares by the end of 2017, and to sell the remainder of (at most) 25% minus 1 share by the end of 2018.
The country did not, however, meet these requirements because it halted the sales process in June 2017 because of "the excessive impact on price caused by the issue of transferred foreign currency deposits in Croatia".
Namely, NLB was taken to court in Croatia over the deposits repaid to the bank's former customers in Croatia by Croatian banks, which then decided to seek compensation from the Slovenian bank in court.
Slovenian media are speculating that the Commission could now demand recovering of the state aid that NLB had received.
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