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Emerging Europe banking: EU pressure pays off

European authorities deserve credit for pushing through reform of Slovenia’s banking sector.

Much has been said and written in recent years about the shortcomings of the European Union in the banking sphere, most of it entirely justified. By any measure European authorities have a fairly dismal record when it comes to creating the profitable, competitive banking sectors that member states and their economies urgently need. 

One area in which the EU has consistently shown both its value and its teeth, however, is over the question of state aid to banks. 

Perhaps the best example of this is Slovenia. In the wake of a banking crisis in 2013, five of the country’s state-owned lenders came under Competition Commission scrutiny. The two smallest were closed, while terms were set for the restructuring and privatization of the rest.

This was no small task. Between them, the three lenders – NLB, NKBM and Abanka – accounted for nearly half of all banking assets in Slovenia. The problems in the sector had been caused by years of bad governance, particularly in relation to lending to state-owned enterprises.

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