UPDATE 1-Bank of Slovenia to impose restrictions on surging consumer loans

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UPDATE 1-Bank of Slovenia to impose restrictions on surging consumer loans

(Updates with quote, details)

By Marja Novak

LJUBLJANA, Oct 9 (Reuters) – Slovenia’s central bank said on Wednesday it will impose restrictions on consumer loans in coming weeks to curb “excessive” credit growth and head off financial risks.

The ratio between a borrower’s annual debt costs and their net income could no longer exceed 67%, the Bank of Slovenia said. The curbs will apply to loans to a maximum maturity of seven years.

The restriction will also apply to consumer real estate loans.

“The purpose of this is to prevent excessive crediting, prevent taking on excessive debt and prevent the easing of credit standards,” Primoz Dolenc, deputy governor of the Bank of Slovenia, told a news conference.

He said annual growth of consumer loans exceeds 10%, well above economic growth of 4.1% in 2018.

“We want healthy credit growth … which will have a positive effect in the long run,” Dolenc said.

Slovenia had a banking crisis in 2013 when the government had to pour more than 3 billion euros into local banks to prevent them from collapsing under a large amount of bad loans. It narrowly escaped having to ask for an international bailout.

Since then, banks have returned to profit and reduced bad loans 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 some 12% from over 50% in 2013.

Local banks are mostly owned by foreign banks and investors, including U.S. investment firm Apollo Global Management, Italy’s Unicredit and Intesa Sanpaolo, Hungary’s OTP bank, Serbia’s AIK bank, Russia’s Sberbank and Austria’s Sparkasse and Addiko Bank.

Reporting by Marja Novak;
Editing by Alison Williams & Kim Coghill