EN ECB-PUBLIC  
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 13 August 2013 
on measures to strengthen bank stability 
(CON/2013/67) 
 
Introduction and legal basis 
On 8 July 2013, the European Central Bank (ECB) received a request from the Slovenian Ministry of 
Finance for an opinion on the amendments to th e Regulation on the implementation of measures to 
strengthen bank stability (hereinaft er the ‘Amended 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 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 provisions1, as the draft regulation 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 the 
European Central Bank, the Governing Council has adopted this opinion. 
 1.  Purpose of the Amended Regulation 1.1 The Regulation on the implementation of measures to strengthen bank stability
2 (hereinafter the 
‘Regulation’), which implements the Law on Slovenia’s measures to strengthen bank stability3 
(hereinafter the ‘Law on bank stability’), was amended in order to: (a) clarify the procedure for the implementation of measures to strengthen the stability of banks, i.e. (i) the transfer of banks’ assets 
to the State-owned Bank Asset Management Company (BAMC), (ii) the issuance of State guarantees for the BAMC’s liabilities, and (iii) th e recapitalisation of banks by the State; and 
(b) clarify the role of Banka Slovenije, the Inter-Ministerial Committee (hereinafter the 
‘Committee’) and the BAMC in such a procedure. The ECB was previously consulted on both the 
Law on bank stability and the Regulation, a nd issued Opinions CON/2012/71 and CON/2013/21
4 
respectively. 
1.2 The Amended Regulation now clarifies that the process for the approval of State support to banks 
requires a two-step procedure. First, the Govern ment will decide, on the basis of the Committee’s 
                                                           
1  OJ L 189, 3.7.1998, p. 42.  
2  Uredba o izvajanju ukrepov za krepitev st abilnosti bank (Ur.l. RS, No. 22/2013 and 51/2013). 
3  Zakon o ukrepih Republike Slovenije za krepitev stabilnosti bank (ZUKSB) (Ur.l. RS No 105/2012). 
4  All ECB opinions are published on the ECB’s website at www.ecb.europa.eu. 
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2 proposal, whether a bank fulfils the general eligibility criteria for the measures5. If a bank is found 
eligible for the measures, based on the Governme nt’s decision, the second phase of the process can 
start. In this phase, the Committee would initiate  the required activities for determining the final 
scope and conditions for the implementation of the respective measures, i.e. the preparation of a 
bank’s business strategy, and at the end of the process, it would present the Government with a 
proposal for the implementation of the measures6. The Government’s decision to approve State 
support to banks will be made on the basis of a bank’s submitted business strategy, the 
Committee’s proposal and the European Commission’ s opinion on the compliance of the measures 
with Union State aid rules7. 
1.3 A bank’s business strategy will have to show that  the bank will be able to operate sustainably and 
successfully in the long term and implement bur den-sharing measures and measures to prevent or 
mitigate any possible distortion of competition8. For the purpose of assessing a bank’s business 
strategy, the Committee will obtain Banka Slovenije’s assessment thereof9 and, pursuant to the 
Amended Regulation, will also ta ke into account the results of th e asset quality review and stress 
tests to be performed by an external contractor10. The Committee will submit a proposal to the 
Government for the decision on measures, on the basis of Banka Slovenije’s assessment, and the 
asset quality review11. If the Government approves the pr oposed measures and the European 
Commission gives a positive opinion on the complian ce of the measures with EU State aid rules, 
the BAMC and the relevant bank may enter into an  agreement for the implementation of measures, 
in accordance with the bank’s business strategy12. 
1.4 With regard to a bank’s business strategy, th e Amended Regulation clarifies that a bank’s losses 
must be covered by available components of that bank’s capital and the assets of existing holders of 
the bank’s capital instruments, where it is perm itted to use the instruments for such purpose 
pursuant to the underlying contract13. 
1.5 The assets to be transferred to the BAMC will be selected by the bank and the BAMC from the 
prescribed asset categories. The Amended Regulation requires that such selection is carried out in 
cooperation with Banka Slovenije14. Assets outside the prescribed categories may be transferred to 
                                                           
5  I.e. whether a bank is lacking, or within the following 12 mont hs will not have sufficient capital to meet capital adequacy 
requirements and, as a result, the stabilit y of the financial system is threatened. See Article 4 of the Amended Regulation. 
6  See Article 8 of the Amended Regulation. 
7  See Article 8 of the Amended Regulation. 
8  See Article 6 of the Regulation. 
9  Pursuant to Article 7(1) of the Regulati on, Banka Slovenije will assess the busine ss strategy regarding (a) the impact of 
the anticipated measures on the bank’s capital adequacy and th e ability of the bank to ensure capital adequacy in the 
future without further measures or aid from the BAMC or the St ate, (b) the use of valuation methods in the assessment of 
long-term economic value, including the determination of the price of new shares or other capital instruments and the 
determination of the price for the purpose of transferring the bank’s risk items to the BAMC, and (c) the bank’s ability to 
ensure long-term profitable operations and stable capital adequacy with the anticipated measures  and activities. 
10  See Article 7(3) and (4) of  the Amended Regulation. 
11  See Article 8(1) and (2) of  the Amended Regulation. 
12  See Article 9 of the Regulation. 
13  See Article 6(3) of the Amended Regulation. 
14  See Article 15 of the Amended Regulation.  
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3 the BAMC if the bank or the BAMC shows that  the transfer of such assets will improve the 
BAMC’s management efficiency or confidence in th e bank, but only subject to prior consent of the 
Committee15. Pursuant to the Amended Regulation, the Committee may request changes to the 
proposed business strategy with respect to selected  assets to be transferred to the BAMC, taking 
into account the results of the asset quality review and stress tests, and based on the opinion of Banka Slovenije
16. 
1.6 The assets to be transferred will be evaluated on the basis of their real long-term economic value. 
The transfer price will equal the real long-term  economic value minus the amount of the BAMC’s 
refinancing and operating costs17. The amendments require that the costs to be borne by a bank 
must be reasonable and justified and shall be determined in the contract between the bank and the 
BAMC on the basis of the Committee’s prior opinion. The contract between the bank and the BAMC may stipulate that an agreed part of such co sts is to be paid by the bank in advance of the 
transfer to the BAMC. If the payment for the transf er of assets is provide d by way of delivering 
BAMC’s government-guaranteed bonds to the bank, th e principal of the bonds must be equal to the 
transfer price
18. 
1.7 Further amendments have been introduced to th e methodology for evaluation of the assets that will 
be transferred to the BAMC19 and to the provisions on recapitalisation measures20. 
 2.  Duty to consult the ECB The ECB received a request for this Opinion after the amendments to the Regulation had been adopted 
and entered into force. Pursuant to Articles 127(4) an d 282(5) of the Treaty, the ECB must be consulted, 
taking due account of the ECB’s fields of competence , on draft national legislative provisions and at an 
appropriate stage in the legislative process. This im plies that the consultation should take place at a point 
in the legislative process that affo rds the ECB sufficient time to examin e the draft legislative provisions, 
adopt its opinion and allow the releva nt national authorities to take the ECB’s opinion into consideration, 
prior to the adoption of the provisions. The ECB re quests that, in future, the Ministry honours its 
obligation to consult the ECB in due time. 
 3. Role of Banka Slovenije The ECB notes that Banka Slovenije’s role in the pro cess for the implementation of relevant measures has 
been strengthened by: (a) new Article 8(2) of the Amended Regulation which explicitly states that the 
Committee’s proposal to the Government on the impl ementation of measures sh all be based on Banka 
                                                           
15  See Article 14(3) of th e Amended Regulation. 
16  See Article 15 of the Amended Regulation. 
17  See Article 17 in connection with Ar ticle 23 of the Amended Regulation. 
18  See Article 22 of the Amended Regulation. 
19  See Article 18 to 20 and the Annex to the Amended Regulation. 
20  See Articles 10 to 12 of the Amended Regulation. 
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4 Slovenije’s assessment of a bank’s business strategy, a nd (b) amended Article 15 of the Regulation which 
provides that the proposed selection of assets to be tr ansferred shall be prepared by the BAMC and the 
relevant bank, in cooperation with  Banka Slovenije. The ECB welcomes such new provisions regarding 
Banka Slovenije’s role, as they are also in  line with previous Opinions CON/2012/71 and 
CON/2013/2121. 
 4.  Asset quality review and stress tests The ECB welcomes that the authorities are committed to mandating external contractors to conduct asset 
quality reviews
22 and stress tests, and to consulting European  institutions in the process, including the 
ECB23. In order to ensure credible results in terms of  revealed resilience and capital needs of the banks, 
such exercises should be performed in accordance with  best international practice, avoiding conflicts of 
interest. The application of measures to banks on th is basis should help to restore confidence in the 
Slovenian banking system. In this context Banka Slove nije, as supervisor and contributor to the stability 
of the financial system, should be closely involved in the process of asset quality reviews and stress tests. 
Pursuant to Article 7 of the Amended Regulation,  the Committee shall, within the business strategy 
assessment process, take into account the results of both the asset quality reviews and stress tests, while 
Article 8 states that the Committee’s proposal to the Government will be prepared on the basis of the 
asset quality review (and on the basis of Banka Slove nije’s assessment of the business strategy) but not 
the stress test. The ECB notes that  the Committee’s proposal should also  take into account the results of 
the stress tests. 
 5.  Valuation of assets to be transferred to the BAMC The assets that will be transferred to the BAMC will  be evaluated on the basis of their real long-term 
economic value. The methodology for the estimation of  such value of assets to be transferred to the 
BAMC has been amended. In this context, the ECB no tes that such estimation shall be in line with Union 
rules and practices on State aid, and in particular those regulating the valuation of assets in asset relief schemes
24. 
 
                                                           
21  See paragraph 4.2 of Opinion CON/2012/71 and paragraph 4 of Opinion CON/2013/21. 
22  See also recital 14 of Council Recommendation of 9 July  2013 on the National Reform Programme 2013 for Slovenia 
and delivering a Council opinion on the Stability Progra mme of Slovenia, 2012-2016 (OJ C 217, 30.7.2013, p. 75). 
23  In this context, however, the ECB notes th at it is not for the national legislator to assign tasks to the ECB. The ECB is 
governed by, and acts in accordance with, the Statute of the European System of  Central Banks and of the European 
Central Bank and other releva nt provisions of Union law. 
24  Communication from the Commission on the treatment of impair ed assets in the Community banking sector (OJ C 72, 
26.3.2009, p. 1). 
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5 6.  Subscription of new capital instruments 
With respect to recapitalisation measures, the ECB notes that any provision of extraordinary public 
financial support to a bank should not be taken in to account when determining the subscription price of 
new capital instruments that such bank may issue. 
 7.  Other observations The ECB notes that the Amended Regulation follows  the ECB’s previous recommendation to remove 
from the Regulation the requirement that banks shou ld commit to increase lending to small and medium-
sized companies, as the extension of credit should always rely on a sound assessment of borrowers’ 
creditworthiness. The ECB invites the authoriti es to consider also implementing the other 
recommendations from Opinion CON/2013/21, such as the establishment of a cash pr otocol to ensure the 
timely or early repayment of BAMC State-guar anteed bonds. Also, appropriate oversight and 
transparency of the BAMC’s operations w ill be crucial for the success of the scheme
25. 
 This opinion will be published on the ECB’s website.   Done at Frankfurt am Main, 13 August 2013. 
 
[signed] 
 
The President of the ECB 
Mario DRAGHI 
                                                           
25  See paragraphs 6 and 10 of Opinion CON/2013/21.