Moody\'s downgrades Slovenia\'s second largest bank

Slovenia's second-largest bank NKBM saw its long-term deposit rating downgraded by Moody's on Tuesday amid fears the country, once a model EU and eurozone newcomer, could become the next Cyprus. State-owned NKBM said Moody's downgraded its long-term deposit rating to Caa2, or vulnerable to default, from B3 with a negative outlook, citing further weakening of the bank's credit portfolio. Problems at Slovenia's banks, which are struggling under a mountain of bad debt, have prompted speculation that the former Yugoslav republic could be the next country to seek a bailout after Cyprus. Earlier this month, Moody's also downgraded the long-term bank deposit rating of Slovenia's largest bank NLB to vulnerable to default. In 2012, NKBM's losses reached 205.5 million euros ($263 million) compared to 81.1 million euros a year earlier, mainly due to write-downs of bad loans. Moody's said the NKBM would need a further capital injection to meet the European Banking Authority's (EBA) capital requirements while sizeable provisioning needs would undermine its already weak capital base. Fears of a banking bailout pushed Slovenian benchmark bond yields to 6.1 percent on Tuesday from 5.04 percent last week, the STA news agency reported. Last October, when the country's unions blocked the government's reform measures, they had risen above 7.0 percent, a level seen as unsustainable in the long term. The International Monetary Fund (IMF) and the European Commission have urged newly appointed centre-left government led by Alenka Bratusek to address the country's banking sector crisis caused by high levels of non-performing loans.