Opinion of the European Central Bank of 15 October 2013 on measures for bank reorganisation (CON/2013/73)
Date: 2013-10-15
Institutions: European Central Bank
Subjects: Slovenia, bank, banking supervision, financial solvency, financial stability, national law

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 opinion 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 the European 

Central Bank, the Governing Council has adopted this opinion. 

1. 

Purpose of the draft law 

1.1  The  draft  law  mainly  relates  to  ‘extraordinary  measures’  that  Banka  Slovenije  may  impose  on 

banks that fail or are likely to fail to meet minimum requirements 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) restoring the bank to long-term viability pursuant to the 
Law on banking and other applicable laws or (ii) enabling 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) increasing  the  share  capital  of  the  bank;  and  (d)  transferring  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 

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4  

Zakon o bančništvu (ZBan-1) (Ur. l. RS No 99/2010 – official consolidated text, as amended). 
OJ L 189, 3.7.1998, p. 42. 
See conditions for the application of extraordinary measures in the amended Article 253a of the Law on banking. 
See the proposed new Article 253b of the Law on banking. 

 
 
 
 
 
                                                           
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extent  necessary  to  cover  losses and  ensure  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 detail, inter alia, the tasks of the administrators, which include 
assessing the viability of, and preparing a reorganisation plan for, the relevant bank6. The draft law 

also modifies provisions on other existing extraordinary measures, i.e. bank’s share capital increase 
and transfer of assets7. 

1.4  Banka Slovenije will regularly assess the effectiveness of extraordinary measures in terms of their 

objectives.  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 proceedings8. 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 limitations to Banka Slovenije’s liability for damages 

with respect 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 members 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 reorganisation of distressed banks. 

The  ECB  understands  that  Banka  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 related 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 

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11  
12  

See the amended Section 7.7.2. of the Law on banking. 
See amendments to Articles 255a to 260b of the Law on banking. 
See amendments to Articles 262a and 262b of the Law on banking. 
See amendments to Article 263 of the Law on banking. 
See amendments to Article 266 of the Law on banking. 
See the amended Section 10.2.2. of the Law on banking. 
See the proposed new Article 253b, point 1 of the Law on banking. 
See the proposed new Article 253b, point 2 of the Law on banking. 

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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  into  common  shares 

hybrid capital instruments 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  Law  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  Single  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 extraordinary measures, such banks need public support to 

ensure their viability or orderly resolution in the event that they are not viable. 

3. 

Specific observations 

3.1  The proposed new Article 260a of the Law on banking prohibits the administrators 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  repayment  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 Banka 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 described 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  should  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 

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14  

15  

See paragraph 3.1 of Opinion CON/2012/101 and paragraph 3.2 of Opinion CON/2013/10. 
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). 
Communication from the 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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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 institutions17, where those 

measures are ‘intended to preserve or restore the financial situation of a credit institution and which 

could  affect  third  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 should 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  
17  

See paragraph 1 of Opinion CON/2012/99. 
OJ L 125, 5.5.2001, p. 15. 

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