EN ECB -PUBLIC 
 
 
OPINION OF THE EUROPEAN CENTRAL BANK  
of 22 March 2013  
on the measures for strengthening bank stability  
(CON/20 13/21) 
 
Introduction and legal basis  
On 7 March  2013, the European Central Bank (ECB) received a request from the Slovenian Ministry of 
Finance for an opinion on a draft regulation on the implementation of measures to strengthen bank  
stability (hereinafter the ‘draft regulation’).   
The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the 
Functioning of t he 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 provisions1, as the draft regulation  relate s 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 the 
European Central Bank, the Governing Council has adopted this opinion.  
 
1.  Purpose of the draft regulation  
1.1 Criteria and conditions for the application of measures aimed at strengthening bank stability  
1.1.1  The draft regulation implements the Law on Slovenia’ s measures to strengthen bank stability2 
(hereinafter the ‘Law on bank stability ’). It lays down criteria and conditions for : (a) the transfer of  
a bank ’s3 assets to the Bank Asset Management Company (BAMC) or to dedicated companies4; 
(b) the issuance of State guarantees for liabilities of the BAMC  and of  the dedicated companies;  
(c) the increase of a bank’s  share capital and of other capital instruments of banks  which are taken 
into acc ount in calculating a  bank’ s capital pursuant to the Law on  banking5, 6. 
                                                           
1  OJ L 189, 3.7.1998, p. 42.  
2  Zakon o ukrepih Republike Slovenije za krepitev stabilnosti bank  (Uradni list Republike Slovenije  No 105/2012). 
3  Pursuant to Article 2 of the draft regulation in connection to Article 2 of the Law on bank stability , ‘bank’ here  refers  to a 
bank or a savings bank, as defined in the Law on Banking, with its head office in  Slovenia . 
4  Dedicated companies are companies that take over the risks of banks. They may be established by the banks or by the 
banks together with the BAMC, as joint-stock companies, pursuant to Articles 2 and 21 of the Law  on bank stability . 
5  Zakon o bančništvu (Uradni list Republike Slovenije, No 99/2010 , official consolidated text , 9/2011 –  ZPlaSS -B, 
35/2011, 59/2011, 85/2011, 48/2012 and 105/2012).  
6  See Article 3 of the draft regulation.  
ECB -PUBLIC  
2 1.1.2  The measures may apply to  a bank where  the Government establishes that the bank  does not have, 
or will not have  within the following 12 months , sufficient capital to meet  capital adequacy  
requirements  and, as a result,  the stability of the  financia l system is threatened7.  
1.1.3  In order to be eligible for the measures , a bank must be able to show in its business strategy that it: 
(a) will be able to conduct long -term sustainable and successful operations and have stable and 
adequate capital; (b)  will implement measures for the suitable participation of its own assets and 
the assets of holders of the bank’s capital instruments taken into account in calculating the bank’s 
capital to attain these goals ; (c) will implement measures to  prevent or mitigat e any pos sible 
distortion of competition8. On the basis of the Government’s decision and after having received a 
positive opinion f or State aid from the European Commission, the BAMC and the bank will 
conclude a n agreement  on implementing the approved meas ures in accordance with the business 
strategy9. 
1.2 Purchase or takeover of bank assets or rights  for consideration  
Pursuant to the draft regulation , the BAMC may acquire bank assets by transfer of all rights under 
certain risk items of the bank to the BA MC for consideration . The BAMC may take over risk items 
of a bank only if it also participat es in increasing the bank’s share capital or acquires other capital 
instruments  of the bank. The following risk items may be transferred to the BAMC: ( a) bank claim s 
exceeding EUR 500 000 on the day of the valuation against non- payers10 classified in group D or E  
which are in default  for more than 90 days or otherwise unlikely to be repaid in full ; (b) a bank’s 
capital investments in shares or holdings in the share ca pital of companies with their head offices in 
Slovenia, which the bank  acquired when  realising  its collateral rights over such capital investments 
or when  increas ing debtor  share capital  through  non-cash contribution s, the subject of  which were 
the claims of the bank against the debtor ; (c) real property, which the bank  acquired when  realis ing 
its collateral rights ; (d) off-balance sheet items of the bank, if their  acquisition will increase  the 
BAMC’s  management efficiency  or confidence in the bank11. The draft regulation requires that a 
bank ’s risk items be valued on the basis of the real long -term economic value of assets12. As a rule, 
the payment for transfer s of assets will be provided to banks in the form of BAMC bonds  
guaranteed by the State and will be  equal to the value of the assets , reduced by refinancing costs of 
the BAMC13. According to the draft regulation, the bank’s assets may also be transferred to a 
dedicated company14. 
                                                           
7  See Article 4 of the draft regulation.  
8  See Article 6 in connection to Article 2(2) of the draft regulation.  
9  See Articles 8 and 9 of the draft regulation. See also Article 20(6) of the Law on bank stability.  
10  According to Article 2(2)(4) of the draft regulation, the ‘non -payer ’ is a legal entity with its head office in Slovenia and 
the characteristics of a debtor whose financial assets or assumed liabilities are classified in Group D or E in accordance 
with the Decision on estimating the credit risk losses of banks and savings banks.  
11  See Articles 13 and 14 of the draft regulation.  
12  See Article 16 of the draft regulation.  
13  See Articles  21(3) and 22(1) in conjun ction with Article 23 of the draft regulation.  
14  See Article 30 of the draft regulation.  
ECB -PUBLIC  
3 1.3 Issuance of State guarantees for liabilities  of the BAMC and dedicated companies  
State guarantee s may be issued for BAMC liabilities  meet ing the ECB’s  eligibility criteria for 
collateral  in monetary policy  operations15. State guarantees may be issued also for liabilities of a  
dedicated company16. 
1.4 Increase of bank share capital and other capital instruments  
A bank ’s share capital may be increased with cash  contributions for  new ordinary shares of the 
bank  or other capital instruments that are taken into account when  calculatin g a bank ’s capital.17. 
 
2.  Duty to consult the ECB  
The ECB was consulted on the draft provisions of the Law on bank stability , which the draft regulation 
now implements , and adopted Opinion CON/2012/7118. Some of the amendments to t he draft provisions 
of the Law on bank stability, following  adoption of that  ECB Opinion , were substantial. The national 
authorities did not consult the ECB on those amendments.  Furthermore , the draft regulation subject to this 
consultation was adopted four business days after the ECB received the request for an  opinion. The ECB 
would like to draw the Ministry’s attention to the proper procedure for its consultations . The national 
authorities must consult the ECB on substantive new provisions introduced in draft legislative acts after 
the adoption of an  ECB opinion on such draft leg islative act . The ECB must also be consulted at an 
appropriate stage of the legislative procedure afford ing the ECB sufficient time to prepare its opinion and 
enabl ing the relevant national authorities to take the ECB’s opinion into consideration before th e draft 
provisions are adopted19. 
 3. General observations  
The ECB welcomes the efforts of the Slovenian authorities to address its banking sector ’s difficulties . 
The implementation of the measur es envisaged  under the draft regulation would however be most 
effective in promoting financial intermediation  if they were embedded in a comprehensive financial 
sector strategy  aimed at creating a more resilient and profitable banking system . In this context, a n 
independent system -wide asset quality review and a fresh stress test using  appropriately severe  
assumptions  should be conducted, also with a view to ensur ing that the fiscal envelope remains realistic 
and the selection of tools is appropriate.  
 
                                                           
15  See Articles 25 and 26 of the draft regulation.  
16  See Articles 30 to 34 of the draft regulation.  
17  See Chapter 2 of the draft regulation.  
18  All ECB Opinions are published on the ECB’s website at www.ecb.europa.eu.  
19  See Article 127(4) of the Treaty on the Functioning of the European Union and Council Decision 98/415/EC. See also the 
Guide to consultation of the European central bank by national authorities regarding draft legislative provisions.  
ECB -PUBLIC  
4 4.  Role of Banka Slovenije  
In Opinion CON/2012/71, the ECB noted that Banka Slovenije  should be more actively involved in the 
BAMC, in particular in any procedure identifying the banks that would be eligible to draw on the 
measures. Against this background, it should not be the Government or the Committee , but rather Banka 
Slovenije  assessing and deci ding whether the stability of the financial system is threatened20. Banka 
Slovenije  should also be given a role in the valuation of assets to be transferred  to the BAMC or any 
dedicated company21. Article 16(2) provide s that t he long- term real economic value of assets is assessed 
by the bank and the assessment confirmed by an authorised independent auditor. While the ECB 
welcomes  the involvement of an independent auditor, Banka Slovenije  should  be given a prominent, if 
not lead ing, role in determining the long -term real economic value, with the valuation to be confirmed by  
such auditor . 
 
5. Eligibility of bonds , credit claims and other financial instruments  as collateral in Eurosystem 
credit operations  
As payment  for the transferred assets , the participating banks will receive bonds  issued by the BAMC  or 
dedicated companies  and guaranteed by the State . Potentially the banks could  also have credit claims 
against the BAMC and dedicated companies arising from loans granted to them f or the purposes of  asset 
transfer  payment . It follows from Articles 25 and 26 of the draft regulation that t hese instruments and 
credit claims will be  structured to meet the conditions set out in Guideline ECB/2011/14 of 20 September 
2011 on monetary polic y instruments and procedures of the Eurosystem22. In this context t he ECB 
emphasises that it is the prerogative of the Eurosystem to decide, on the basis of any information it may 
consider relevant within the legal framework laid down in and according to Ar ticle 18.1 of the Statute of 
the European System of Central Banks and of the European Central Bank, whether such instruments  and 
credit claims fulfil the criteria of its collateral framework . In addition, the consideration provided for the 
transferred bank s assets by the BAMC or a dedicated company must comply with the U nion state aid 
framework.   
 6. Dividend payments and use of excess cash holdings by the BAMC  
The draft regulation should provide for  the necessary legal arrangements to ensure , in a transp arent 
manner, the timely redemption of State -guaranteed BAMC bonds , other financial instruments  and credit 
claims  of transferring banks
23. This may be accomplished by additional provisions which limit dividend  
payment s by the BAMC and by ensuring that cash held by the BAMC is , as a priority,  applied to the 
timely  or early repayment of the State -guaranteed bonds  or other potential ly issued financial instruments 
                                                           
20  See Article 4(1)(2) of the draft regulation.  
21   See Articles 3 and 30 of the draft regulation.  
22  OJ L 331, 14.12.2011, p. 1.  
23  While the compensation for the assets transferred to the BAMC will be primarily provided in the form of BAMC S tate-
guaranteed bonds, according to Article 22(2) of the draft regulation the BAMC may also take a S tate-guaranteed l oan 
from the transferring bank or ensure other sources of financing for the takeover of risk items.  
ECB -PUBLIC  
5 or credit claims of the transferring banks24. In addition, if  the BAMC’s liabilities  towards banks arising 
from bonds, credit claims or  other potential financial instruments ar e transferred to another entity after the 
expir y of the BAMC’s term in 2017, as follows from the Law  on bank stability25, the cash protocol 
arrangements should apply to such entity as well. The same requirements should also apply to dedicated 
companies.   
 
7.  Asset valuation and management  
The valuation of assets to be transferred should correspond to their real economic value. The definition of 
‘real long -term economic value’  used i n Article 16 (3) of the draft regulation should be thus brought in 
line with the Communication from the Commission on the Treatment of Impaired Assets in the 
Community Banking Sector . The valuation to be performed by Banka Slovenije or the BAMC should be 
confirmed by an internationally renowned audit firm that has not had any business dealings with the 
participating bank for more than three years.  
The BAMC will likely receive a large set of heterogeneous assets, such as diverse credit claims, equity 
partici pations and real estate property. Therefore , a comprehensive and transparent asset management and 
divestiture strategy should be developed to promote efficient BAMC operations and minimise costs borne 
by the public. To this effect the ECB expects that the BAMC will additionally abide by internationally 
recognised best practice as regards corporate governance.  
 
8.  Other i ssues  
Article 5(3) (16) of the draft regulation provide s that the bank must include as part of its business strategy 
a plan of measures to enhance the scope of loans, primarily of loans to small and medium -sized 
companies, and measures to implement  the sustainable business model. The ECB notes that t he eligibility 
of banks for the measures envisaged should not be contingent on a commitment to increase lending to 
smal l and medium -sized companies, since extension of credit should always rely on a sound assessment 
of borrowers’ creditworthiness.  
Given the fixed financial envelope of the BAMC  and the need to restore the soundness  of participating 
banks, assets that represent the greatest  burden for such bank s should be transferred to the BAMC first. 
The corresponding wording in Article 15( 2) should be brought in to line with Article 21 (2) of the draft 
regulation.  
 
9. Dedicated companies  
The ECB not es that the draft regulation allows the banks to also apply to transfer risky assets to a 
dedicated company as an alternative to the BAMC. It does not however stipulate any further specific 
                                                           
24  See also O pinion CON/2012/108, paragraph 9.  
25  Article 36(3) of the Law on bank stability provide s that the assets, rights and obligations of the BAMC w ill be transferred 
to the Slovenian Compensation Company (or its legal successor, i.e. Slovenia Sovereign Holding), whereas the legal 
succession of the BAMC w ill be specified by the Government i n an executive act on preliminary reportin g to the 
Parliament.  
ECB -PUBLIC  
6 conditions that dedicated companies have to meet to be able to tak e over bank assets, apart from those 
mentioned in Article 32 of the draft regulation. It would be advisable to include in the draft regulation 
minimum conditions on key matters , such as  corporate governance standards and conflict of interest rules , 
which w ould have to be part of the bye -laws of dedicated companies.  
 
10. Monitoring the BAMC and dedicated companies  
For asset management companies established in other euro area countries to which bank assets have been 
transferred , the ECB has welcomed arrangem ents where an independent body , not involved in the 
activities of the company , monitors the operations of the company and has access to relevant information. 
The ECB notes that no such mechanism is envisaged for the BAMC and dedicated companies that may be 
established. The ECB suggests that such arrangements may nevertheless prove useful, to enhance the 
acceptance of the scheme and its work, and therefore could still be considered by the authorities in the 
implement ing regulations or any other relevant legal act.  
 
This opinion will be published on the ECB’s website.  
  
Done at Frankfurt am Main, 22 March 2013.  
 
[signed]  
 
The Vice -President of the ECB  
Vítor CONSTÂNCIO