Opinion of the European Central Bank of 13 August 2013 on measures to strengthen bank stability (CON/2013/67)
Date: 2013-08-13
Institutions: European Central Bank
Subjects: Slovenia, State aid, bank, financial stability, national law, share capital

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  the  Regulation  on  the  implementation  of  measures  to 

strengthen bank stability (hereinafter 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  stability2  (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)  the  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, and issued Opinions CON/2012/71 and CON/2013/214 

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 Government will decide, on the basis of the Committee’s 

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OJ L 189, 3.7.1998, p. 42.  
Uredba o izvajanju ukrepov za krepitev stabilnosti bank (Ur.l. RS, No. 22/2013 and 51/2013). 
Zakon o ukrepih Republike Slovenije za krepitev stabilnosti bank (ZUKSB) (Ur.l. RS No 105/2012). 
All ECB opinions are published on the ECB’s website at www.ecb.europa.eu. 

 
 
 
 
                                                           
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proposal, whether a bank fulfils the general eligibility criteria for the measures5. If a bank is found 

eligible for the measures, based on the Government’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 burden-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 take into account the results of the 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  proposed  measures  and  the  European 

Commission gives a positive opinion on the compliance 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,  the  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  permitted  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 

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I.e. whether a bank is lacking, or within the following 12 months will not have sufficient capital to meet capital adequacy 
requirements and, as a result, the stability of the financial system is threatened. See Article 4 of the Amended Regulation. 
See Article 8 of the Amended Regulation. 
See Article 8 of the Amended Regulation. 
See Article 6 of the Regulation. 
Pursuant to Article 7(1) of the Regulation, Banka Slovenije will assess the business strategy regarding (a) the impact of 
the  anticipated  measures  on  the  bank’s  capital  adequacy  and  the  ability  of  the  bank  to  ensure  capital  adequacy  in  the 
future without further measures or aid from the BAMC or the State, (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. 
See Article 7(3) and (4) of the Amended Regulation. 
See Article 8(1) and (2) of the Amended Regulation. 
See Article 9 of the Regulation. 
See Article 6(3) of the Amended Regulation. 
See Article 15 of the Amended Regulation.  

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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 the 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 Slovenije16. 

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 costs is to be paid by the bank in advance of the 

transfer to the BAMC. If  the payment  for the transfer of assets is provided by way of delivering 

BAMC’s government-guaranteed bonds to the bank, the principal of the bonds must be equal to the 
transfer price18. 

1.7  Further amendments have been introduced to the 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) and 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 implies that the consultation should take place at a point 

in the legislative process that affords the ECB sufficient time to examine the draft legislative provisions, 

adopt its opinion and allow the relevant national authorities to take the ECB’s opinion into consideration, 

prior  to  the  adoption  of  the  provisions.  The  ECB  requests  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 process 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  implementation  of  measures  shall  be  based  on  Banka 

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See Article 14(3) of the Amended Regulation. 
See Article 15 of the Amended Regulation. 
See Article 17 in connection with Article 23 of the Amended Regulation. 
See Article 22 of the Amended Regulation. 
See Article 18 to 20 and the Annex to the Amended Regulation. 
See Articles 10 to 12 of the Amended Regulation. 

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Slovenije’s assessment of a bank’s business strategy, and (b) amended Article 15 of the Regulation which 

provides that the proposed selection of assets to be transferred 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  reviews22  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  this  basis  should  help  to  restore  confidence  in  the 

Slovenian banking system. In this context Banka Slovenije, 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 Slovenije’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 notes 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 
schemes24. 

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See paragraph 4.2 of Opinion CON/2012/71 and paragraph 4 of Opinion CON/2013/21. 
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 Programme of Slovenia, 2012-2016 (OJ C 217, 30.7.2013, p. 75). 
In this context, however, the ECB notes that 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 relevant provisions of Union law. 
Communication from the Commission on the treatment of impaired assets in the Community banking sector (OJ C 72, 
26.3.2009, p. 1). 

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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 into 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 should 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  authorities 

to  consider  also 

implementing 

the  other 

recommendations from Opinion CON/2013/21, such as the establishment of a cash protocol to ensure the 

timely  or  early  repayment  of  BAMC  State-guaranteed  bonds.  Also,  appropriate  oversight  and 
transparency of the BAMC’s operations will be crucial for the success of the scheme25. 

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. 

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