EN ECB-PUBLIC  
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 19 September 2012  
on strengthening bank stability 
(CON/2012/71) 
 
Introduction and legal basis 
On 11 September 2012, the European Central Bank (ECB) received a request from the Slovenian 
Ministry of Finance for an opinion on a draft law on Slovenia’s measures to strengthen bank stability (hereinafter the ‘draft law’). 
The ECB’s competence to deliver an  opinion is based on Articles 127(4) and 282(5) of the Treaty on the 
Functioning of the European Union and the third and sixth indents of Article 2(1) of Council Decision 
98/415/EC of 29 June 1998 on the consultation of  the European Central Bank by national authorities 
regarding draft legislative provisions
1, as the draft law relates to Banka Slovenije and rules applicable to 
financial institutions insofar as they materially influe nce the stability of financial institutions and markets. 
In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central 
Bank, the Governing Council has adopted this opinion. 
 1.  Purpose of the draft law 
1.1 The draft law regulates the Bank Assets Management Company (BAMC), the Bank Stability Fund 
(hereinafter the ‘Fund’) and measures to strengthe n the stability of banks in Slovenia. The main 
purpose of the BAMC and the Fund is to strengthen the stability of banks in order to maintain the 
stability of the financial system as a whol e. The BAMC and the Fund are established to: 
(a) minimise the costs of measures under the draf t law, (b) recover taxpayers’ funds, (c) accelerate 
lending to the non-financial sector, (d) contribute  to bank privatisa tion, and (e) clarify 
responsibility for the bank bad claims.  
1.2  The BAMC is a joint-stock company fully owne d by the State. For the purposes of the stabilisation 
measures under the draft law, it establishes and ma nages the Fund. The Fund does not have legal 
personality and the BAMC carries out tasks on its be half. Under the measures in the draft law, the 
BAMC may, on behalf of the Fund, acquire or  by any other means c over risk positions, in 
particular receivables, securities, derivatives,  rights and obligations under approved credits or 
guarantees and company shares, in each case together  with the pertaining collateral, acquired by 
financial institutions before 1 September 2012. The claims are transferred to the Fund at a price 
                                                 
1  OJ L 189, 3.7.1998, p. 42.  
ECB-PUBLIC  
2 reflecting their real long-term economic value.  The BAMC and the Fund are established for the 
period until 31 December 2017. Thereafter their asse ts, rights and obligations will be transferred to 
the Slovenian Restitution Fund or its legal su ccessor, the Slovenia Sovereign Holding.  
1.3  Measures to strengthen the stability of banks provided for by the draft law are: (a) State guarantees 
up to a total amount of EUR 4 billion issued for the liabilities acquired by the BAMC and the Fund 
and the liabilities of special purpose vehicles establishe d by banks to assume their risks; and (b) as 
a subsidiary measure, bank recapitalisation by way of the Fund acquiring bank shares or other own 
funds components. An interministerial commissi on decides on the measures on a proposal by the 
BAMC considering the importance of a particular  bank for financial stability, the urgency of the 
measure and the efficient use of the Fund’s funds . Banks drawing on the measures have to ensure a 
solid and prudent business policy and prepar e a business strategy to be assessed by the 
abovementioned interministerial commission. The BAMC can impose limitations as regards 
management remuneration and bene fits and the distribution of di vidends and other shareholders’ 
rights in such banks.  
  
2. Duty to consult the ECB 
The draft law is scheduled to be discussed by  the Slovenian Government on 20 September 2012. 
The Ministry requested the ECB to deliver its opi nion as soon as possible, which effectively means 
that the ECB has been given a very short dead line of six working days. The ECB would like to 
draw the Ministry’s attention to the proper pro cedure for its consultations, in particular the 
requirement to afford the ECB sufficient time to prepare its opinion2. 
 3. Consultation on the implementing acts 
The ECB understands that the draft law only serv es as the basis for the operations of the BAMC 
and the Fund and for the implementation of measu res for strengthening bank stability in Slovenia. 
More detailed rules will be set out in implementin g acts to be adopted by the Government. Such 
implementing rules are of great relevance to the Eurosystem, for example as regards the price at 
which claims are transferred to the Fund and the F und’s investment strategy and policy. Taking due 
account of the ECB’s fields of competence, the E CB invites the Slovenian authorities to consult it 
on any such implementing acts. The Slovenian author ities should ensure that requests to the ECB to 
issue an opinion on the implementing acts are in su fficient time to be compatible with the deadline 
stipulated by the draft law for the adoption of Government implementing acts (one month 
following the entry into force of the draft law).  
 
                                                 
2 See the Guide to consultation of the Eu ropean Central Bank by national authoritie s regarding draft legislative provisions. 
All ECB opinions and the Guide are available on the ECB’ s website at www.europa.eu. In the context of recent 
consultations by Slovenia also  referred to in Opinion CON/ 2012/57 and Opinion CON/2012/48.  
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3 4. Role of Banka Slovenije   
4.1 Banka Slovenije is involved in the activities provide d for in the draft law to a limited extent: (a) it 
has a consultative role in adopting the Statut e of the BAMC and impos ing limitations on banks 
drawing on the measures under the draft law, (b) it has the right to propose one of four non-executive members of the Management Board of th e BAMC, (c) the BAMC can refer to it for the 
purpose of carrying out its activities, as regards the competences under the Law on banking, and (d) its representative is one of seven members of  the interministerial commission deciding on the 
measures under the draft law. 
4.2 Banka Slovenije as the banking supervisor should be more actively involved in the activities of the 
BAMC, in particular in any procedure identif ying the banks drawing on the measures under the 
draft law as well as identifying and defining the valu e of the assets to be transferred to the Fund. 
The draft law could clarify how the measures under th e draft law fit into the system of supervisory 
measures taken by Banka Sloven ije within its supervisory co mpetence pursuant to the Law on 
banking. The ECB would therefore suggest explicitly  providing for an appropriate role of Banka 
Slovenije either in the draft law or in any other relevant legal act
3. 
 5. Bank recapitalisation by the Fund and eligibility of bonds issued by the BAMC as collateral 
in Eurosystem operations 
5.1 In accordance with Article 20 of the draft law, the Fund can participate in the recapitalisation of 
banks, in particular by acquiring shares and ta king over other own funds items. The Ministry 
decides on the acquisition and disposal of shares.  
5.2 As consistently expressed in its opinions
4, the ECB generally prefers issuances of shares against a 
cash contribution for financial stability reasons. Recapitalisation against non-cash contributions 
may in this case be carried out only if the bank share capital increase is based on an additional 
measure of Banka Slovenije5. Such investment in banks of the bonds issued by the State-owned 
BAMC is not desirable from the financial stability perspective as it reinforces the link between the 
State and the banking sector. 
5.3 In accordance with Article 10 of the draft la w, the BAMC may issue bonds and other financial 
instruments guaranteed by the State to finance the purchase of bank bad claims. Such bonds and 
other financial instruments can be paid by a tran sfer of bank claims to the Fund and according to 
the draft law, they should comply with the ECB’s conditions for financing of financial institutions.  
5.4 The draft law does not fully exclude the bonds a nd financial instruments issued by the BAMC from 
being used for the purpose of recapitalisation of  banks. As stated in previous ECB opinions6, where 
a recapitalisation of a credit institution to restor e its solvency takes place by way of direct 
                                                 
3 This view has already been provi ded in paragraph 4 of CON/2012/57.  
4  See paragraph 2.2 of Opinion CON/2012/23 and in the contex t of consultations by Sloveni a paragraph 4.1.2 of Opinion 
CON/2012/48 and paragraph 7 of opinion CON/2012/57. 
5  See Article 43(8), point 2 of the Law on banking. 
6  See e.g. Opinion CON/2012/64. 
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4 placement of State-issued debt instruments, the subsequent use of such bonds or financial 
instruments as collateral in central bank liquidi ty operations would raise monetary financing 
concerns in the absence of any alternative market-b ased funding sources for such State-issued debt 
instruments. The same concerns would arise should the bonds and financial instruments issued by the BAMC
7 be used for the bank recapitalisation.  
5.5 As regards the provision of the draft law that fi nancial instruments issued by the BAMC will meet 
the ECB’s conditions for financ ing of financial institutions8, the ECB understands that the BAMC 
is under an obligation to shape the instruments it issues to meet the requirements for eligible 
collateral for Eurosystem monetary policy operations9. The ECB emphasises that it is the 
prerogative of the Eurosystem to decide whether collateral fulfils the criteria of its collateral 
framework on the basis of any information it may consider relevant.  
 6. Fiscal implications of the draft law 6.1 The draft law provides for various sources of  funding, including bond issuance, Government 
deposits with banks and State borrowing
10. In accordance with Article 12 of the draft law, the State 
can borrow additional funds to fi nance the Fund notwithstanding the provisions of the Law on 
public finance. The draft law, however, does not define under which circumstances and by how 
much the State is entitled to borrow additional fund s. Thus, the draft law could imply significant 
fiscal costs, although the draft law inter alia  aims at ‘minimising the costs of measures’ and 
‘recovering taxpayers’ funds’11. 
6.2 In this context, it should be also specified how to value the transferred claims to the Fund12 and 
whether a discount factor will be applied, as this  determines the required funding and the potential 
fiscal costs. 
6.3 In addition, to limit the potential fiscal implicati ons the draft law could set out limits regarding the 
recapitalisation of banks in which the Fund could also participate13. While a limit exists for State 
guarantees14, the involvement in bank recapitalisation is not limited.  
 
                                                 
7  According to the draft law, the BAMC is a joint-stock comp any fully owned by the State. The functions and powers of its 
Assembly are exercised by the Government. The Republic of Sl ovenia is liable for all obligations of the BAMC arising 
from the performance of activities under the draft law. The BAMC  is subject to legal and te chnical supervision by the 
Ministry of Finance. The Statute of th e BAMC is adopted and amended by the Mi nistry of Finance in consultation with 
Banka Slovenije. 
8  See Article 10(2) of the draft law. 
9  See Annex I of Guideline ECB/2011/14 of 20 September 2011 on monetary policy instruments and procedures of the 
Eurosystem (OJ L 331, 14.12.2011, p. 1). 
10  See Articles 8(3), 10(1) and 12(1) of the draft law. 
11  See Article 2(2) of the draft law. 
12  See Article 9(8) of the draft law. 
13  See Article 20 of the draft law. 
14  See Article 19(5) of the draft law. 
ECB-PUBLIC  
5 7. Governance and competences of the BAMC 
7.1 In accordance with Article 7 of the draft law,  the BAMC’s Management Board is composed of 
seven directors appointed by the Government. It is recommended to appoint a number of independent directors to the Management Board to  allow the BAMC to better resist the potential 
pressure from borrowers and prospective purchaser s of assets seeking preferential treatment. While 
still possible under the abovementioned provision of th e draft law, the appointment of independent 
directors is not expressly stipulated. 
7.2 Article 18(1) of the draft law provides that th e interministerial commission decides on the use of 
the measures under the draft law. The draft law c ould be more explicit as to which types of 
decisions would be taken by the interministerial  commission and which decisions will be delegated 
to the BAMC Management Board in its day-to-day operations. 
 This opinion will be published on the ECB’s website.   Done at Frankfurt am Main, 19 September 2012. 
 
[signed] 
 
The President of the ECB 
Mario DRAGHI