EN ECB -PUBLIC 
 
 
 
OPINION OF THE EUROPEAN CENTRAL BANK  
of 15 October 2013  
on measures for bank reorganisation  
(CON/2013 /73) 
 
Introduction and legal basis  
On 19 September  2013, the European Central Bank (ECB) received a request from the Slovenian 
Ministry of Finance for an o pinion on a draft law amending the Law on banking1 (hereinafter the ‘draft 
law’).  On 4 October 2013, the ECB received a revised version of 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 provisions2, as the draft law relates to Banka Slovenije and to rules applicable 
to financial institutions insofar as they materially influence the stability of financial institutions and 
markets. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of th e European 
Central Bank, the Governing Council has adopted this opinion.  
 
1. Purpose of the draft law  
1.1 The draft law mainly relate s to ‘extraordinary measures ’ that Banka Slovenije may impose on 
bank s that fail or are likely to fail to meet minimum requ irements for capital  and liquidity  in a way 
that would justify the withdrawal of the authorisation3. The extraordinary measures may be 
imposed on a bank with a view to either (i)  restor ing the bank to long- term viability pursuant to the 
Law on banking and other applicable laws or (ii) enabl ing an orderly wind- down of the  bank4. 
1.2 There are four types of extraordinary measures already available to Banka Slovenije: (a) putting the 
bank into special administration , and appointing administrators ; (b) selling  all of the bank’s shares ; 
(c) increas ing the share capital of the  bank ; and (d) transfer ring the bank’s assets. The draft law 
broadens this framework of extraordinary measures to empower Banka Slovenije to reduce share 
capital , to write down hybrid capital  instruments and subordinated liabilities of a bank , or to 
convert hybrid capital instruments and subordinated liabilities into common shares of a bank, to the 
                                                           
1  Zakon o bančništvu (ZBan- 1) (Ur. l. RS No 99/2010 –  official consolidated text, as amended) . 
2  OJ L 189, 3.7.1998, p. 42.  
3  See conditions for the application of extraordinary measures in the amended Article 253a of the Law on banking . 
4  See the propose d new Article 253b of the Law on banking. 
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2 extent necessary to cover  losses and ensur e the capital adequacy of a bank. Any  exercise of this 
power  shall adhere to the principle that no creditor shall be worse off than under normal insolvency 
proceedings5. 
1.3 Furthermore, the draft law revises the rules on other extraordinary measures. As regards special 
administration, it specifies in more de tail, inter alia , the tasks of the administrators , which include  
assessing  the viability of , and prepar ing a reorganisation plan for , the relevant bank6. The draft law 
also modifi es provisions on other existing extraordinary measures, i.e. bank’s share cap ital increase 
and transfer of assets7. 
1.4 Banka Slovenije will regularly assess the effectiveness of extraordinary measures in terms of their objective s. Should the bank’s situation during the implementation of the extraordinary measures 
not improve to the extent of ensuring its long-term viability, Banka Slovenije will initiate winding 
up proceedings against the bank, i.e. compulsory liquidation or bankruptcy proceedings
8. The rules 
on compulsory liquidation are amended to take account of the revision of the rules governing  the 
extraordinary measures9. 
1.5 The draft law also amends  the provisions on legal recourse against Banka Slovenije’s decision on 
extraordinary measures. It further specifies limit ations  to Banka Slovenije’s liability  for damages  
with r espect to such measures. Those affected by extraordinary measures may seek compensation if 
the damage suffered is greater than if  no extraordinary measures had been implemented10. 
1.6 Certain amendments are also introduced in relation to the liability of me mbers of banks’ governing 
bodies.  
 
2. General observations  
2.1 The ECB broadly welcomes the draft law as it strengthens the tools and procedures available to 
Banka Slovenije for the effective reorganisati on of distressed banks. 
 The ECB understands that Ba nka Slovenije’s extraordinary measures serve both as tools for the  
restructuring11, as well as the resolution  of banks12. The tasks allocated to Banka Slovenije as a 
supervisory and resolution authority , should not affect its ability to carry out its tasks r elated to the 
European System of Central Banks as provided for by the Treaty and the Statute of the European 
System of Central Banks and of the European Central Bank  (hereinafter the ‘ Statute  of the ESCB’ ) 
from an operational and financial perspective . Furthermore, Banka Slovenije, in exercising its 
powers , should take all measures necessary to ensure appropriate functional separation between its 
                                                           
5  See the amended Section 7.7.2. of the Law on banking. 
6  See amendments to Articles 255a to 260b of the Law on banking. 
7  See amen dments to Articles 262a and 262b of the Law on banking. 
8  See amendments to Art icle 263 of the Law on banking. 
9  See amendments to Article 266 of the Law on banking. 
10  See the amended Section 10.2.2. of the Law on banking. 
11  See the proposed new Article 253b, point 1 of the Law on banking. 
12  See the proposed new Article 253b, poi nt 2 of the Law on banking. 
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3 supervisory and resolution  tasks, on the one hand, and  its monetary policy tasks , on the other  hand, 
in line with the Treaty and the Statute  of the ESCB13. 
2.2 The ECB notes that Banka Slovenije’s new tools and powers in relation to  bank reorganisation, in 
particular the power to reduce share capital  and to write down or convert in to common shares 
hybrid capital inst ruments and subordinated liabilities, draw from  the resolution tools and powers 
provided for in the European Commission’s proposal for a directive establishing a framework for 
the recovery and resolution of credit institutions and investment firms14, which is currently going 
through the adoption process in the European Parliament  and the Council . In this context, the ECB 
understands that the legislator will review the L aw on banking  once the above -mentioned draft 
directive is adopted, in order to ensure full  consistency with developments at Union level.  The 
same applies with respect to the development  and implementation of the S ingle Supervisory 
Mechanism , which will confer specific tasks on the ECB concerning policies relating to the 
prudential supervision of credit institutions . 
2.3 Union State aid rules15 must be complied with whenever Banka Slovenije imposes reorganisation 
measures in the form of extraordinary measures as provided for under the Law on banking  in 
respect of any bank and, in addition to extra ordinary measures, such banks need public support to 
ensure their viability or orderly resolution in the event that they are no t viabl e. 
 
3. Specific observations  
3.1 The proposed new Article 260a of the Law on banking prohibits the administrat ors from  paying out 
holders of capital instruments and subordinated liabilities , where the bank’s operations are to be 
gradually wound down, without the prior consent of Banka Slovenije. The draft law further states 
that Banka Slovenije will  give its consent to the re payment of such instruments and liabilities 
where  their non- payment could endanger the stability of the financial system. In line with State aid 
rules, such consent may be given at  Banka Slovenije’s discretion, but only in exceptional 
circumstances when Ba nka Slovenije considers that the stability of the financial system would be 
endangered. In this context,  the ECB notes an inconsistency in the regime of exceptions to burden-
sharing measures under the proposed new Article 260a of the Law on banking as desc ribed above 
and the regime under the proposed new Section 7.7.2 of the Law on banking , where no exceptions 
to burden- sharing are provided for.  
3.2 As highlighted  in previous ECB opinions on bank resolution, institutions that are failing or likely to 
fail s hould in principle, subject to a decision by the resolution authorities, be resolved using 
resolution tools when this is deemed necessary and in the public interest, including the prevention 
                                                           
13  See paragraph 3.1 of Opinion CON/2012/101 and paragraph 3.2 of Opinion CON/2013/10. 
14  Proposal for a Directive of the European Parliament and of the Council establishing a framework for the recovery and 
resolution of credit institutions and investment firms and amending Council Directives 77/91/EEC and 82/891/EC, 
Directives 2001/24/EC, 2002/47/EC, 2004/25/EC, 2005/56/EC, 2007/36/EC and 2011/35/EC and Regulation (EU) 
No 1093/2010 (COM (2012) 280 final). 
15  Communication from t he Commission on the application, from 1 August 2013, of State aid rules to support measures in 
favour of banks in the context of the financial crisis (‘Banking Communication’) (OJ C 216, 30.7.2013, p. 1). 
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4 of systemic risk. If the resolution authority concludes that there is no public interest concern, the 
institution should be liquidated under the insolvency proceedings normally applicable to such 
institutions under national law16. 
3.3 The draft law seeks to ensure that Banka Slovenije’s decisions on extraordinary measures are 
recognised, and therefore enforced, in other Member States. In this respect , the ECB welcomes that 
the revised version of the draft law explicitly defines Banka Slovenije’s extraordinary measures as reorganisation measures under Directive 2001/24/EC  of the European Parliament and of the 
Council of 4 April 2001 on the reorganisation and winding up of credit institutions
17, where those  
measures are ‘ intended to preserve or restore the financial situation of a credit institution and which 
could affect thi rd parties' pre -existing rights, including measures involving the possibility of a 
suspension of payments, suspension of enforcement measures or reduction of claims’ . 
3.4 Finally, the valuation of a  bank ’s assets pursuant to the proposed new Article 261b s hould not be 
made  on the assumption that the bank  is a going concern, except for the purpose of determining the 
value of new shares in the case of an increase in share capital by means of  the conversion of 
qualified liabilities into equity on the basis of the relevant extraordinary measure.  
 
This opinion will be published on the ECB’s website.  
  
Done at Frankfurt am Main, 15 October 2013.  
 
[signed]  
 
The President of the ECB  
Mario DRAGHI  
 
                                                           
16  See paragraph 1 of Opinion CON/2012/99. 
17  OJ L 125, 5.5.2001, p. 15 .