By Marja Novak
LJUBLJANA (Reuters) – Slovenia’s central bank said on Wednesday it will impose restrictions on consumer loans to curb “excessive” credit growth and protect borrowers from becoming overindebted.
Slovenia narrowly escaped having to ask for an international bailout for its banking sector in 2013 but since then, lenders have returned to profit and reduced their pile of bad loans.
Primoz Dolenc, deputy governor of the Bank of Slovenia, told a news conference that annual growth of consumer loans currently exceeds 10%, well above economic growth of 4.1% in 2018.
Under the new restrictions, the ratio between a borrower’s annual debt costs and their net income will no longer exceed 67%, the Bank of Slovenia said, while consumer loans will have a maximum maturity of seven years.
“The purpose of this is to prevent excessive crediting, prevent taking on excessive debt and prevent the easing of credit standards,” Dolenc said.
“We want healthy credit growth … which will have a positive effect in the long run,” he added.
Slovenia’s Bank Association called the restrictions excessive and said they could force citizens to seek loans outside the regulated banking sector, with potentially harsh consequences due to unfavorable lending conditions.
“The restrictions could hurt … the weakest segment of the population and cause much economic damage to the whole business environment in Slovenia,” the association said.
The central bank said the restriction in the cost/income ratio would also apply to consumer real estate loans.
The government poured more than 3 billion euros into local banks during the banking crisis to prevent them from collapsing under large amounts of bad loans.
Those bad loans fell to 3% of all loans in July from 4% at the end of last year. The government has also sold several banks, reducing its control over the banking sector to just 12% from over 50% in 2013.
Local banks are mostly owned by foreign banks and investors, including U.S. investment firm Apollo Global Management (N:), Italy’s Unicredit (MI:) and Intesa Sanpaolo (MI:), Hungary’s OTP bank (BU:), Serbia’s AIK bank, Russia’s Sberbank (MM:) and Austria’s Sparkasse and Addiko Bank.
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