May 24, 2017 / 2:39 PM / 3 months ago

Slovenian central bank head urges govt to rethink supervision plan

Bostjan Jazbec, Slovenia's central bank governor, speaks during an interview in Ljubljana December 13, 2013.Srdjan Zivulovic/File photo

LJUBLJANA (Reuters) - The governor of the Bank of Slovenia, Bostjan Jazbec, said on Wednesday that the government's proposal to introduce some supervision of the central bank is unprecedented in the euro zone.

Last month, the government approved legislative changes that would give the Court of Audit, a state body that supervises public spending, some oversight of the Bank of Slovenia's business activities, including its decisions that led to spending of public funds over the past 10 years.

Parliament is due to debate the law in the coming weeks.

"The proposal violates the rules of the European system of central banks and European legislation," Jazbec, who also sits on the ECB governing council, said in an interview at the Reuters Central & Eastern Europe Investment Summit.

Jazbec said the Court of Audit should only be able to review organization and economics of the central bank while it should not be allowed to review bank supervisory decrees.

If the law is passed "it could happen that the Bank of Slovenia will be pushed into a dilemma over whether to respect our national legislation or the European one," said Jazbec, urging the government to reconsider its plans.

In recent years the central bank has come under fire from a number of local analysts, politicians and the media about the money it needed to rescue the country's banks as part of a 2013 banking overhaul that enabled Slovenia to narrowly avoid requiring an international bailout.

In that year the government had to pour about 3 billion euros into local banks to prevent them from collapsing under a mountain of bad loans. As part of the bank overhaul, holders of shares and subordinated bonds of troubled banks lost their assets.

BANKS IN GOOD CONDITION

Jazbec also said Slovenian banks are in good condition and have sufficient capital although their bad loan ratio remains high at 8.2 percent of all loans as of the end of 2016, according to the European Banking Authority classification.

A separate report published by the central bank on Wednesday showed local banks had a joint net profit of 128 million euros in the first three months of the year, down 1 percent from the same period last year, mainly due to lower interest rate income.

Their balance sheet assets at the end of March were 1.5 percent higher than at the end of 2016 while loans to non-financial sector, including companies and households, were up by 3 percent year-on-year.

Reporting By Marja Novak; Editing by Hugh Lawson

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