LJUBLJANA, Dec 12 (Reuters) - The Slovenian government must urgently speed up insolvency and bankruptcy procedures in the financially-troubled euro zone member state, the Bank of Slovenia said on Wednesday.
It said a law recently prepared by the government to streamline the bankruptcy process was “a step forward but too small a step”.
Insolvency and bankruptcy procedures in Slovenia often take years rather than months. This prevents local banks, burdened with a rising volume of bad loans, from quickly selling assets confiscated from firms that default on loans.
Slovenian banks, at the heart of speculation that the country may need a bail-out next year, have some 6.7 billion euros ($8.7 billion) of bad loans, equivalent to 19 percent of gross domestic product.
The number of insolvency procedures that started in November was 37 percent higher than in October, daily Finance reported last week.
“Without immediate changes (to insolvency procedures), a successful restructuring of the economy is not possible,” the bank said in a statement.
“Time is of key importance” in the insolvency processes, it added.
Slovenia was badly hit by the global crisis because of its dependency on exports, lack of new loans on international markets and strained public finances. It fell back into recession in the third quarter this year as export demand shrank and domestic spending remained subdued due to budget cuts.
The government expects the economy to contract by 2 percent this year and by another 1.4 percent in 2013.
In October Slovenia managed to issue its first sovereign bond in 19 months, averting a bail-out for at least six months. ($1 = 0.7693 euros) (Reporting By Marja Novak, editing by Stephen Nisbet)