EN 
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 8 January 2009 
at the request of the Slovenian Ministry of Finance  
on a draft decree laying down criteria and conditi ons for the implementation of State capital 
investments and for the conversion of State claims  into capital shares under Article 81.a of the Law 
on public finance 
(CON/2009/3) 
 Introduction and legal basis
 
On 30 December 2008 the European Central Bank (ECB) received a request from the Slovenian Ministry 
of Finance (hereinafter the ‘Ministry’) for an opinion on a draft decree laying down criteria and 
conditions for the implementation of State capital inv estments and for the conversi on of State claims into 
capital shares under Article 81.a of the Law on public  finance (hereinafter the ‘draft decree’). 
The ECB’s competence to deliver an  opinion is based on Article 105(4) of the Treaty establishing the 
European Community and the sixth indent of Article 2(1) of Council Decision 98/415/EC of 
29 June 1998 on the consultation of the European Ce ntral Bank by national authorities regarding draft 
legislative provisions1, as the draft decree relates to rules applic able 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 decree 1.1 The legal basis for the adoption of the draft d ecree is the Law on public finance (hereinafter the 
‘Law’)
2 which provides for four categories of measures to limit the effects of the global financial 
crisis in Slovenia and maintain the stability of the domestic financial system. One of these 
measures is the implementation of State capita l investments in credit institutions, insurance 
companies, reinsurance companies and pensi on companies with their seat in Slovenia. 
Article 88.a(1) of the Law requires the Governme nt to adopt separate decrees for each of these 
measures setting out the criteria, conditions and ch arges for their implementation. This opinion 
                                                 
1  OJ L 189, 3.7.1998, p. 42.  
2  Law on public finance, published in Uradni list Republike Slovenije  No 79/1999.  
2 focuses on those aspects of the draft decree that concern State capital investments in credit 
institutions. 
1.2 Under the draft decree, the credit institutions that may obtain State capital investments are credit 
institutions as defined in the Law on banking3 with their seat in Slovenia, which due to the effects 
of the global financial crisis will probably not be  able to fulfil minimum capital requirements under 
the legislation in force without State capital investments. 
1.3 State capital investments will take the form of ordinary or preference shares or any other 
instruments with the characteristics of basic capital as defined in the legislation in force. The rights 
to be acquired by the State arising from capital inv estment in the form of preference shares (i.e. 
voting rights, rights to a dividend, certain rights in  the event of a reduction in the share capital of 
the credit institution in order to cover losses, ri ghts to a share of the estate in bankruptcy or 
liquidation) are defined in detail in the draft decree. 
1.4 The Ministry will be responsible for processing applications for State capital investments. If it 
assesses, on the basis of an assessment of th e need for and appropriateness of State capital 
investments provided by Banka Slovenije as the co mpetent supervisory authority, that a credit 
institution is entitled to obtain State capital inv estment, it can propose to the Government that it 
should adopt a decision approving State capital inv estment in that credit institution. Terms and 
conditions as well as commitments to be accepted by  the beneficiary (e.g. restrictions on the 
income and other benefits of the company’s management, including options over the company’s 
shares, and restrictions with respect to dividend  payments and other shareholder rights) will be 
defined in such Government decision and the Government will notify Banka Slovenije of the 
adoption of the decision. 
1.5 In the event of realisation of a guarantee gran ted to a credit institution under Article 86.a of the 
Law or in the event of a State claim in respect of a loan under Article 81.a of the Law arising 
against a credit institution, the Government can adopt  a decision to convert State claims into capital 
shares in that credit institution if the State is not otherwise able to enforce them against the credit 
institution. For such a debt to equity swap, th e rules on obtaining State capital investments apply 
mutatis mutandis . 
1.6 In accordance with Article 15 of the draft decree, the decree will apply until 31 December 2010. 
 2. General observations 
It is proposed to adopt the draft decree on the basis of the Law on which the ECB has already issued an 
Opinion, CON/2008/76
4. As the ECB is now bei ng consulted on legislation implementing the Law, the 
observations made in Opinion CON/2008/76 also apply to the draft decree. 
                                                 
3  Law on banking, published in Uradni list Republike Slovenije  No 131/2006.  
4  ECB Opinion CON/2008/76 of 25 November at the request of th e Slovenian Ministry of Finance on a draft law amending 
the Law on public finance. All ECB opinions are av ailable on the ECB’s website at www.ecb.europa.eu. 
3  
3. Specific observations 
3.1 Conditions for State capital investments and rela tionship with the single monetary policy of the 
euro area 
3.1.1 In line with the ‘Declaration on a concerted European action plan of the euro area countries’ issued 
by the Heads of State of the euro area on 12 October 2008 (hereinafter the ‘Declaration’)5, Member 
States must act in a coordinated manner to avoid significant differences in national implementation 
having a counter-productive effect and creati ng distortions in global banking markets. The 
Declaration acknowledges the need to work in cooperation with the ECB to ensure consistency 
with the Eurosystem’s management of liquidity  and compatibility with its operational framework. 
Against this background, the ECB reiterates th at uncoordinated decisions among Member States 
should be avoided as they may lead to a fragmentation of the euro area money market. In this respect, the ECB makes the following observations , which are important from a monetary policy 
perspective, as regards State capita l investments under the draft decree. 
3.1.2 In accordance with Article 5 of the draft decree, State capital investments take the form of ordinary 
or preference shares or any other instruments with the characteristics of basic capital as defined in 
the legislation in force. In this respect the E CB notes that the recapitalisation measures considered 
in Member States are aimed at strengthening the capital position of fundamentally sound financial 
institutions, in order to improve the functioning a nd stability of the banking system and to ensure 
the proper financing of the economy. In particular, a consistent approach should be used in defining 
the conditions for recapitalisations and the prici ng of the instruments intended to provide Tier 1 
capital to financial institutions. The ECB underlin es the importance of appropriate pricing for 
recapitalisations to reflect the goals of enhancing the stability of the financial system, facilitating a 
return to normal market conditions and ensuring th e proper financing of the economy. Against this 
background, the ECB has published recommendations of its Governing Council on the pricing of 
recapitalisations (hereinafter the ‘Recommendations’)
6. The ECB highlights that the pricing 
conditions for capital support should be  risk-based and market-oriented,  determined by taking into 
consideration the specific risk of both the specifi c instrument chosen for injecting capital and the 
institution concerned. Specific features of the inst ruments for capital injections (such as preference 
shares) should be appropriately chosen so that, wh ile encouraging an early end to the State’s capital 
support of banks, they should not result in an  excessive increase in the cost of capital.  
3.1.3 Pursuant to Article 15 of the draft decree, the decree will apply until 31 December 2010. In line 
with the Declaration, the ECB emphasises that harmonisation regarding the expiry of national financial support schemes across the EU and in pa rticular within the euro area is of crucial 
importance. Although Article 1 of the draft decree mentions that capital investments under the Law 
                                                 
5  The Declaration is available on the French Presidency’s website at www.ue2008.fr. 
6  See the Recommendations of the Governing Council of the Eu ropean Central Bank on the pr icing of reca pitalisations 
issued on 20 November 2008, available on the ECB’s website at www.ecb.europa.eu. 
4 and the draft decree will be of a temporary nature an d introduced in order to limit the effects of the 
global financial crisis as well as to maintain the stability of the financial system, the draft decree 
should expressly provide for the temporary natu re of the Slovenian State’s intervention. 
Furthermore, in line with previous ECB opinions7, it should be ensured that such measures are in 
accordance with the requirements of Community competition law, in particular State aid rules, and 
that the State’s role as shareholder is limited in time. In this respect, and in accordance with the 
Recommendations, the draft decree should set out terms for the redemption or conversion of the instruments either on the basis of a period of tim e or the development of market conditions. This 
would serve to ensure the temporary nature of the State’s involvement and discourage financial 
institutions from maintaining such invol vement for an extensive period of time.   
3.2 Central bank involvement in the support measures 3.2.1 The ECB understands that under the draft decr ee, Banka Slovenije is responsible for assessing the 
need for and appropriateness of State capital invest ment in a credit institution, indicating whether 
the credit institution concerned fulfils the conditions  for State capital investment under the Law and 
the draft decree and whether State capital investment is the most appropriate measure to achieve the Law’s aims
8. 
3.2.2 In line with its previous opinions9, the ECB reminds the Slovenian authorities that the tasks 
performed by Banka Slovenije must comply w ith the monetary financing prohibition under 
Article 101 of the Treaty and Council Regulation (EC) No 3603/93 of 13 December 1993 specifying definitions for the application of the prohibitions referred to in Articles 104 and 104b(1) of the Treaty
10. It is also expected Banka Slovenije will perform any tasks in connection with State 
support measures in a manner fully compatible wi th its institutional and financial independence 
thereby safeguarding the proper performance of its  tasks under the Treaty and the Statute of the 
European System of Central Banks a nd of the European Central Bank.  
3.2.3 Moreover, the ECB understands that the entire co st of implementing State capital investments will 
be exclusively financed from State funds acqui red by additional State borrowing in accordance 
with Article 81.a of the Law. The ECB understands  that such additional State borrowing will not 
include prefinancing or refinancing of the St ate budget by Banka Slovenije, e.g. by Banka 
Slovenije extending overdraft credit facilities to the Slovenian State or directly acquiring State debt instruments. 
                                                 
7  See e.g. paragraph 3.8 of ECB Opinion CON/2008/68 of 13 N ovember 2008 at the request of the Finnish Ministry of 
Finance on a draft government proposal for laws amending the Law on the Government Guarantee Fund and the Law on 
credit institutions. 
8 See Article 7 of the draft decree. 
9  See paragraph 3.3 of ECB Opinion CON/2008/88 of 19 Decem ber 2008 at the request of the Slovenian Ministry of 
Finance on a draft decree laying down cr iteria and conditions for granting guarantees under Article 86.a of the Law on 
public finance and paragraph 3.2 of ECB Opinion CON/2008/ 92 of 22 December 2008 at the request of the Slovenian 
Ministry of Finance on a draft decree laying down criteria a nd conditions for granting loans under Article 81.a of the Law 
on public finance. 
10  OJ L 332, 31.12.1993, p. 1. 
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This opinion will be published on the ECB’s website.    Done at Frankfurt am Main, 8 January 2009. 
  
[signed] 
 
The President of the ECB 
Jean-Claude TRICHET