Belgian banking and insurance group KBC has announced it would "reassess its investment" in Slovenia's largest bank, NLB. Unhappy with its inability to become a majority shareholder, the KBC said it would "limit its responsibility...to that of a pure financial investor".

The Belgian group made its announcement on Wednesday, 10 May, after months of talks with the Slovenian government on the future ownership structure in NLB.

"Over the past few months, NLB's shareholders have been discussing and negotiating the long-term plans for NLB Bank and KBC's role in its future. Although progress has been made, major differences of opinion amongst the shareholders remain," KBC said.

According to the Belgian firm, which owns 34% of NLB, its inability to convince the government to let it increase its stake to a majority stake has prompted it to review its role in the NLB.

"As a minority shareholder, KBC feels it would lack sufficient influence to bring NLB's performance into line with the European average. Nor would it be able to bring the international development of NLB in the Balkans sufficiently up to cruising speed."

KBC spokesperson Viviane Huybrecht stressed that the announcement means that KBC no longer intends to take part in the operative management of NLB.

According to her, the Belgian group intends to recall its representatives in the NKB management, although it would keep its representatives on the supervisory board.

Responding to the announcement, Finance Minister Andrej Bajuk said that selling the bank to a foreigner would greatly limit Slovenia's leverage over its financial market.

According to Bajuk, EU regulations demand of Slovenia that it ensure stability of its financial sector, which is why Slovenia does not want to lose an important instrument of influence on the sector.

Bajuk explained that KBC representatives wanted to reach a deal with the government that would allow the Belgian firm to become a majority stakeholder in NLB over three years. The Finance Ministry did not agree with this plan, Bajuk said.

He said that time was not the issue in allowing KBC to acquire a majority stake but rather Slovenia's responsibility to uphold the EU regulations and ensuring that its financial system was stable.

Bajuk explained that another sticking point was Slovenia's system of insuring deposits of individual banks. Slovenian legislation, he said, sets down that depositors in a defunct bank be repaid from a fund financed by other banks - if the NLB were to go bankrupt, it would lead to huge problems on the Slovenian banking market.

Meanwhile, KBC stressed it was not changing its strategy of making Central and Eastern Europe its second home market. "Going forward, KBC will continue to explore and act on opportunities for direct investment in the Balkan states," it added.

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