Slovenia, hit hard by a boom-bust cycle and the euro area's debtwoes, faces a “severe” banking crisis if it doesn't act quickly,the Organization of Economic Cooperation and Development said.

The Alpine nation should recapitalize “distressed, viable banks”while holders of subordinated debt and “lower-ranked hybrid capitalinstruments should absorb losses,” the Paris-based OECD said in areport today. State-owned banks such as Nova Ljubljanska Banka d.d.and Nova Kreditna Banka Maribor d.d. should be sold and non-viablebanks should be wound down, it said.

“Limited equity markets and the backlog in the privatizationprogram are hindering foreign direct investment, whose increasewould help smooth corporate deleveraging,” the group of the world'swealthiest countries said in the report. “An agreement on a list ofpublic assets to be privatized or managed by a new sovereignholding is still lacking.”

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