Slovenia, hit hard by a boom-bust cycle and the euro area's debt woes, 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 capital instruments should absorb losses,” the Paris-based OECD said in a report today. State-owned banks such as Nova Ljubljanska Banka d.d. and Nova Kreditna Banka Maribor d.d. should be sold and non-viable banks should be wound down, it said.

“Limited equity markets and the backlog in the privatization program are hindering foreign direct investment, whose increase would help smooth corporate deleveraging,” the group of the world's wealthiest countries said in the report. “An agreement on a list of public assets to be privatized or managed by a new sovereign holding is still lacking.”