Bad Bank And Other Possible Banks’ Rescuing Models – The Case Of Slovenia

During the economic crisis, Slovenia has transformed from one of the most successful new EU Member States into one of the most problematic ones. The reason for this is largely extensive banking problems, that continue to cause uncertainty on financial markets and adversely affect the rating of the country and consequently also the price of borrowing for both the state and private entities. Slovenia has opted to rehabilitate its banking sector by means of a bad bank (DUTB) that, however, only became operational at the end of 2013. The paper seeks to examine whether a bad bank has indeed proven the most appropriate choice out of possible methods of resolving the banking crisis, based on the most recent findings regarding the suitability of various methods of bailing out banking systems in crisis, taking into consideration key elements required for the successful rehabilitation thereof. The paper finds that, taking into consideration all relevant circumstances, the bad bank has proven to be appropriate solution in the Slovenian case but the delay in rehabilitating the banking system has had significant negative macroeconomic impacts as demonstrated by a comparison to other selected countries that had opted to bail out the banking sector before Slovenia. State ownership of systemic banks and political instability have both greatly contributed to slow action taken.