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New Slovenia central bank chief says no need for bailout

By Marja Novak

LJUBLJANA (Reuters) - Slovenia does not currently need international financial help to sort out its crumbling banking system although aid cannot be ruled in future, the euro zone country's incoming central bank governor said on Monday.

Slovenian banks, mostly state-owned, are nursing some 7 billion euros ($9 billion) of bad loans, fuelling concern that the former Yugoslav republic of 2 million could become the euro zone's next bailout recipient.

"Slovenia is still far from asking for international help," Bostjan Jazbec told Reuters in an interview two days before taking up his post.

Jazbec also told Reuters that he is in favor of bank privatization. Slovenia has not sold its main banks since gaining independence in 1991, although the government hopes to start the sale of the second-largest lender Nova KBM later this year.

"I would support any buyer who would be ready to buy any bank and has serious strategic plans that would improve the stability and effectiveness of the Slovenian banking system," Jazbec told Reuters in an interview.

"The Bank of Slovenia wants to ensure the normal functioning of the banking system ... the question of ownership is always of secondary importance," he said.

Jazbec, who will also sit on the European Central Bank's rate-setting governing council, takes over on Wednesday from Marko Kranjec, whose six-year mandate is expiring.

Having sat on the Bank of Slovenia's board from 2003 to 2008, Jazbec is familiar with the ECB decision-making process, but he declined to speculate on if or when the ECB might cut interest rates again.

"I cannot talk about that. I can only say what every student of economy knows: that we can expect more investment when we reduce interest rates."

He also said he hoped foreign direct investment in Slovenia would grow in the coming years as that would mean more economic stability for the country, where economic growth has been mainly based on foreign loans rather than on investment from abroad.

NO BANK RUN

Slovenia joined the euro zone in 2007 and was the shared currency bloc's fastest-growing member that year but was badly hit by the global crisis due to its dependency on exports.

It slipped back into recession last year due to poor export demand fell and a fall of domestic spending caused by budget cuts, while banks put a brake on lending to businesses and households as they struggled with the rising amount of bad loans.

Despite the messy bailout fellow euro zone member Cyprus earlier this year, Jazbec said he did not expect any bank run in Slovenia as the European Union has made it clear that all deposits of up to 100,000 euros are secure, even in banks that close down.

Jazbec said that he could not exclude the possibility of any troubled banks in Slovenia being closed down in future but that nothing like that was planned at present.

"Such a possibility always exists. If the effect of a bank closure is bigger than keeping it up, then it is sensible to close such a bank," he said.

But he added: "At this moment nothing like that is needed in Slovenia yet, there is still a possibility of a solution for all banks."

($1 = 0.7661 euros)

(Reporting By Marja Novak; Editing by Zoran Radosavljevic and Hugh Lawson)

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