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Getting ready for a shake-up

Slovenian banks are among the most protected in Europe. But a new banking law and reforms linked to the country's accession to the EU will shake them up. Charles Olivier reports.

The slow pace of state sell-offs

For Slovenia's 24 local banks, 1999 is likely to be a crunch year. For the first time, foreign competitors will be allowed to open branch offices rather than subsidiaries (thereby removing the need for a local capital base). Two of the country's largest banks (Nova Ljubljanska Banka and Nova Kreditna Banka Maribor) are scheduled for privatization. And local companies will be able to raise short-term funds internationally without having to deposit 40% of the money in a non-interest-bearing account with the central bank.

Since Slovenia gained independence from Yugoslavia in 1991, its banks have been heavily protected from outside competition. Foreign banks have not been permitted to use overseas capital to finance local lending. They have not been allowed to buy strategic stakes in state-owned banks, and the cost of obtaining a banking licence has been kept extremely high at Dm60 million ($34 million). At the same time, international portfolio investors wishing to buy shares on the local stock exchange have been forced by law to hold those stocks with local custodians.

The close relationships enjoyed by local banks with government and the corporate sector have made it hard for outside firms to break into the market.

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