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EU clears Slovenia bank aid

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(BRUSSELS) - The European Commission on Wednesday cleared crisis-hit Slovenia's 4.6-billion-euro plan to recapitalise and restructure its over-extended banking system.

The country's three biggest state-owned banks -- NLB, NKBM and Abanka -- will receive 3.0 billion euros ($4.1 billion) immediately while Factor Banka and Probanka will be shut down.

The Commission said it had approved the plans for NLB and NKBM "in particular because they will enable the banks to become viable in the long term without unduly distorting competition."

The closure of Factor Banka and Probanka is positive because "the distortions of competition created by the aid will be minimised by the complete market exit of the two banks," it said.

The Commission said it "temporarily approved rescue aid" for Abanka "for reasons of financial stability," with a final decision to be made once its restructuring plan is submitted.

"Today's decisions ... will strengthen confidence in Slovenian banks," EU Competition Commissioner Joaquin Almunia said in a statement.

After an asset quality review and stress test of the banks, "the restructuring and resolution measures foreseen will ensure that Slovenia's economy can count on a viable, healthy banking sector," he said.

In the restructuring, all five banks will write-down shareholders' equity and outstanding subordinated debt before they get state aid, the Commission noted.

"This will ensure an appropriate contribution by the bank and its owners to the restructuring effort," it added.

Slovenia, in recession since 2011, has been dogged for months by concerns that it could become the sixth eurozone member to seek a bailout due to its problem banks.

Last week, however, it said tests showed that it would take 4.8 billion euros to put the banking system back on track and that crucially, it would not need outside help to do so.

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