Opinion of the European Central Bank of 3 May 2016 on the resolution and winding-up of banks (CON/2016/28)
Date: 2016-05-03
Institutions: European Central Bank
Subjects: Slovenia, financial solvency, financial stability, financial supervision, liquidation

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 3 May 2016  

on the resolution and winding-up of banks 

(CON/2016/28) 

Introduction and legal basis 

On 25 March 2016 the European Central Bank (ECB) received a request from the Slovenian Ministry of 

Finance  for  an  opinion  on  a  draft  law  on  the  resolution  and  winding-up  of  banks  (hereinafter  the  ‘draft 

law’). On 21 April 2016, the Ministry sent the ECB 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/EC1,  as  the  draft  law  relates  to  Banka  Slovenije  and  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.  

1.1 

Purpose of the draft law 

The  draft  law  amends  the  hierarchy  of  creditors  in  insolvency  proceedings  for  a  bank  and 
provides that creditor’s claims must be paid in the following order 2: 

(1)  

(2)  

the costs of compulsory liquidation proceedings and bankruptcy proceedings; 

priority  claims,  including  employee-related  claims  (e.g.  salaries  for  the  three  months 

preceding  the  opening  of  bankruptcy  proceedings),  damages  for  occupational  diseases 

and accidents at work, severance payments, certain taxes and social contributions linked 
to employee-related claims, etc.3; 

(3)  

claims  comprising  guaranteed  deposits  as  well  as  other  claims  listed  in  Article  80(2)  of 

the  draft  law,  unless  the  claims  listed  in  that  Article  fall  within  the  category  of  priority 

claims (referred to in  point (2)) or  can be enforced on the  basis of the right  to  separate 
satisfaction (i.e., secured claims) or the right to separation 4. Article 80(2) of the draft law 

1  

2  
3  

4  

Council  Decision  98/415/EC  of  29 June  1998  on  the  consultation  of  the  European  Central  Bank  by  national 
authorities regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42). 
See Article 207 of the revised version of the draft law. 

See Article 21 of the Law on Financial Operations, Insolvency Proceedings and Compulsory Dissolution (ZFPPIPP) 
(Ur. l. RS No 13/14 – official consolidated text and 10/15 –corr.).  

The right to separate satisfaction and the right to separation are defined in Articles 19, 20 and 22 of the ZFPPIPP. 
The  ECB  understands  that  creditors  with  a right  to separation (izločitvena  pravica)  are,  for  example,  creditors  with 
retention  of  title  (e.g.  owners  of  property  which  is  in  the  possession  of  the  insolvent  debtor).  The  assets  of  such 
creditors must be separated from the rest of the bankrupt estate and returned to these creditors. Creditors with the 

 
 
 
 
                                                 
 
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lists  liabilities  that  are  excluded  from  the  scope  of  the  bail-in  tool  in  accordance  with 
Article 44 of Directive 2014/59/EU of the European Parliament and of the Council 5. Some 

of these claims are secured claims, others are claims requiring separation (e.g. liabilities 

that arise as a result of a fiduciary relationship) and some represent priority claims (such 

as certain employee claims and related tax claims). The ECB thus understands that the 

claims  that  rank  pari  passu  with  the  guaranteed  deposits  include  creditors’  claims  that 

arise,  primarily,  from  the  following  liabilities  of  a  bank:  (i)  liabilities  towards  institutions, 

not  belonging  to  the  same  group,  with  an  original  maturity  of  less  than  seven  days 

(including,  for  example,  very  short-term  inter-bank  deposits),  (ii)  liabilities  owed  to 

systems  or  operators  of  payment  and  settlement  systems  designated  according  to 
Directive 98/26/EC of the European Parliament and of the Council 6, or liabilities owed to 

the participants in such systems, where the liabilities of a bank result from its participation 

in  such  systems  and  they  have  a  remaining  maturity  of  less  than  seven  days, 

(iii) liabilities arising from the supply of goods or provision of commercial services that are 

critical to the daily functioning of the bank’s operations, including IT services, utilities and 

the  rental,  servicing  and  upkeep  of  premises,  and  (iv)  liabilities  to  deposit  guarantee 

schemes; 

(4)  

eligible deposits of investors, who are natural or legal persons and who satisfy the criteria 

for micro, small and medium-sized enterprises, in excess of the amounts of guaranteed 

deposits (i.e. EUR 100 000), including deposits that would be deemed eligible deposits if 

they had not been deposited at the bank’s branch in a third country; 

(5) 

other eligible deposits not included in points (3) or (4); 

(6)  

deposits  with  the  bank  which  are  not  considered  to  be  eligible  deposits  with  the  bank, 

including:  (i)  deposits  of  banks  and  investment  firms  and  other  financial  institutions 

deposited  on  their  own  behalf  and  for  their  own  account;  (ii) deposits  of  insurance 

companies,  reinsurance  companies  and  insurance  holding  companies;  (iii) deposits  of 

collective 

investment  undertakings, 

including  closed 

investment  undertakings; 

(iv) deposits  of  pension  funds  and  pension  companies;  (v)  deposits  of  governments, 

central  banks  and  entities  which  are  direct  or  indirect  users  of  the  State  budget; 

(vi) deposits  of  local  communities  and  direct  and  indirect  users  of  local  communities’ 
budgets 7; 

5  

6  

7  

right to separate satisfaction (ločitvena pravica) are secured creditors and are thus repaid from the relevant asset. If 
the value of the asset securing the claim is lower than the secured claim, the difference in value will be treated as an 
unsecured claim pursuant to the ZFPPIPP. 
Directive 2014/59/EU of the European Parliament and of the Council of 15 May  2014 establishing a framework for 
the recovery and resolution of credit institutions and investment firms and amending Council Directive 82/891/EEC, 
and  Directives  2001/24/EC,  2002/47/EC,  2004/25/EC,  2005/56/EC,  2007/36/EC,  2011/35/EU,  2012/30/EU  and 
2013/36/EU,  and  Regulations  (EU)  No  1093/2010  and  (EU)  No  648/2012  of  the  European  Parliament  and  of  the 
Council (OJ L 173, 12.6.2014, p. 190). 

Directive 98/26/EC of the European Parliament and of the Council of 19 May 1998 on settlement finality in payment 
and securities settlement systems (OJ L 166, 11.6.1998, p. 45). 

It is noted that under existing Slovenian law there is already a general depositor preference similar to that described 
herein (see Article 365 of the Law on Banking (ZBan-2) (Ur. l. RS No 25/15) in connection with Article 329 of the old 
Law  on  Banking  (ZBan-1)  (Ur.  l.  RS  No  99/10  –  official  consolidated  text,  52/11  –  corr.,  9/11  –  ZPlaSS-B,  35/11, 
59/11, 85/11, 48/12, 105/12, 56/13, 63/13 – ZS-K, 96/13, and 25/15 – ZBan-2 and 27/26 –ZSJV). 

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(7)  

other unsecured ordinary claims (which may include, for example, certain claims arising 

under  derivatives  transactions),  except  claims  arising  from  debt  securities  and  similar 

instruments issued by the bank; 

(8)  

unsecured  and  non-subordinated  claims  arising  from  debt  securities  and  other  similar 

financial  instruments  issued  by  the  bank,  with  the  exception  of  structured  instruments 

which based on their characteristics satisfy the criteria set out in points (2)-(7); 

(9)  

subordinated claims which on the basis of contractual arrangements between the parties 

in the  event of a  bank’s insolvency  proceedings are  paid out  as unsecured claims after 

full payment of the claims referred to in points (2)-(8), and which are not classified in the 

categories referred to in points (10)-(12); 

(10)  

claims  which  satisfy  the  conditions  for  the  bank’s  Tier  II  capital  instruments,  and  other 

subordinated claims which, having regard to the contractual arrangements in the event of 

the  bank’s  insolvency,  are  paid  at  the  same  time  as  claims  arising  from  Tier  II  capital 

instruments; 

(11)  

claims  which  satisfy  the  conditions  for  the  bank’s  Tier  I  capital  instruments,  and  other 

subordinated claims which, having regard to the contractual arrangements in the event of 

the  bank’s  insolvency,  are  paid  at  the  same  time  as  claims  arising  from  Tier  I  capital 

instruments; and 

(12)  

claims  which  satisfy  the  conditions  for  the  bank’s  common  equity  Tier  I  capital 

instruments,  and  other  subordinated  claims  which,  having  regard  to  the  contractual 

arrangements in the event of the bank’s insolvency, are paid at the same time as claims 
arising from common equity Tier I capital instruments 8.  

1.2 

The  draft  law  also  transposes  into  Slovenian  law  certain  provisions  of  Directive  2014/59/EU 

relating  to  the  resolution  of  banks.  In  particular,  the  draft  law  regulates:  (1)  Banka  Slovenije’s 

responsibilities  and  procedures  for  the  implementation  of  its  tasks  and  powers  as  the  banking 

resolution  authority;  (2)  bank  resolution  planning;  (3)  the  resolution  procedures  and  powers 

related  to  the  resolution  tools.  Directive  2014/59/EU  has  already  been  partially  transposed  into 

Slovenian  law. The provisions relating to early  intervention measures, recovery plans and intra-
group financial support were transposed in the recast of the Law on Banking9. Banka Slovenije, 

which  was  already  acting  as  a  resolution  authority  at  that  time,  was  explicitly  designated  as  a 

resolution authority for the purposes of Article 3 of Directive 2014/59/EU under the Law on Bank 
Resolution Authority and Fund10. The current legal framework for the resolution of banks, which is 

also  based  on  Directive  2014/59/EU,  enables  Banka  Slovenije  to  impose  certain  ‘extraordinary 
measures’11  on  banks  that  are  failing  or  likely  to  fail.  These  measures  include:  (a)  putting  the 

8  
9  

10  

11  

See Article 207 of the draft law. 
Law on Banking (ZBan-2), on which the ECB issued Opinion CON/2014/79. All ECB Opinions are published on the 
ECB’s website at www.ecb.europa.eu.  
Law  on  the Bank  Resolution  Authority  and  Fund  (ZOSRB)  (Ur. l.  RS  No  97/14  and  91/15).  Parts  of  this  Law  were 
initially  intended  to  be  included  in  the  recast  of  the  Law  on  Banking,  however,  they  were  later  excluded  from  the 
latter  and  adopted  as  a  separate  legal  act.  The  Law  on  the  Bank  Resolution  Authority  and  Fund  was  adopted  in 
December 2014, shortly after the publication of Opinion CON/2014/79.   

See Opinion CON/2013/73. 

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bank into special administration and appointing administrators; (b) selling all of the bank’s shares; 

(c) increasing the share capital of the bank; (d) transferring the bank’s assets; (e) establishing a 

bridge  bank,  and  (f)  reducing  share  capital,  writing  off  and  writing  down  of:  (i)  hybrid  capital 

instruments,  (ii)  other  financial  instruments  which  must  be  taken  into  account  in  calculating  the 

bank’s additional capital, and (iii) subordinated liabilities of a bank, or converting such instruments 
and subordinated liabilities into common shares of a bank 12. 

1.3 

By  further  adapting  existing  national  legislation  to  comply  with  the  provisions  of  Directive 

2014/59/EU,  the  draft  law  enables  Banka  Slovenije  to  take  resolution  measures  regarding  the 

following  entities  established  in  Slovenia:  (1)  banks,  (2)  financial  institutions  which  are 

subsidiaries  of  a  credit  institution  or  of  a  financial  holding  company,  mixed  financial  holding 

company  or  a  mixed  activity  holding  company,  which  have  their  head  office  in  a  Member  State 

and  are  included  in  the  supervision  of  the  parent  undertaking  on  a  consolidated  basis  in 

accordance with Articles 6 to 17 of Regulation (EU) No 575/2013 of the European Parliament and 
of the Council 13, (3) financial holding companies, mixed financial holding companies or the mixed 

activity  holding companies, which are subsidiaries of credit institutions established in a  Member 

State;  (4)  financial  holding  companies,  mixed  financial  holding  companies  and  mixed  activity 

holding  companies,  which  are  the  parent  undertakings  of  a  credit  institution  established  in  a 
Member State; and (5) Slovenian branches of any third country credit institutions 14.  

1.4 

In  order  for  Banka  Slovenije  to  carry  out  resolution  measures,  the  draft  law  requires  adequate 

internal organisational measures to ensure Banka Slovenije’s operational independence, as well 

as to avoid any potential conflict of interests in the performance of Banka Slovenije’s  resolution 
tasks on the one hand and its prudential supervisory tasks on the other 15.  

1.5 

The draft law takes into  account the competences  of the  Single Resolution  Board and provides 

that  Banka  Slovenije  will  perform  resolution  tasks  and  exercise  resolution  powers  except  in 

situations  where  the  Single  Resolution  Board  is  competent  in  line  with  Regulation  (EU) 
No 806/2014  of  the  European  Parliament  and  of  the  Council 16.  In  such  cases  Banka  Slovenije 

exercises resolution tasks and powers only where this is necessary to implement the decisions of 
the Single Resolution Board17. The draft law also contains provisions that regulate a mechanism 

to  collect  and  transfer,  into  the  Single  Resolution  Fund,  ex  ante  and  extraordinary  ex  post 

contributions  made  by  banks  to  their  head  offices  in  Slovenia.  This  mechanism  was  set  up  in 

accordance  with  Regulation  (EU)  No 806/2014  and  the  Agreement  on  the  transfer  and 

12  

13  

14  
15  
16  

17  

These measures can be found in the old Law on Banking (ZBan-1), which is in the relevant part still applicable as 
provided for in Article 405 of the recast of the Law on Banking (ZBan-2) (Ur. l. RS No 25/15), and in the Law on the 
Bank Resolution Authority and Fund. 

Regulation  (EU)  No  575/2013  of  the  European  Parliament  and  of  the  Council  of  26  June  2013  on  prudential 
requirements  for  credit  institutions  and  investment  firms  and  amending  Regulation  (EU)  No  648/2012  (OJ  L  176, 
27.6.2013, p. 1). 
See Article 2 of the draft law. 

See Article 7(2) of the draft law. 
Regulation (EU) No  806/2014 of the European Parliament and  of the Council of 15 July  2014  establishing uniform 
rules and a uniform procedure for the resolution of credit institutions and certain investment firms in the framework of 
a Single Resolution Mechanism and a Single Resolution Fund and amending Regulation (EU) No 1093/2010 (OJ L 
225, 30.7.2014, p. 1). 

See Articles 7(1), 7(5) and 7(8) of the draft law. 

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mutualisation  of  contributions  to  the  Single  Resolution  Fund.  This  mechanism  was  so  far 

regulated under the Law on the Bank Resolution Authority and Fund. 

1.6 

The  draft  law  reflects  the  powers  and  competences  of  the  ECB  within  the  Single  Supervisory 

ECB-PUBLIC 

in  accordance  with  Council  Regulation  (EU) 
Mechanism  (SSM). 
No 1024/201318, the ECB is competent for the implementation of specific tasks and powers in the 

It  stipulates 

that 

if, 

field of the prudential supervision of banks, Banka Slovenije as the resolution authority will take 

into  account  the  views  and  findings  of  the  ECB  regarding  the  fulfilment  of  a  bank’s  prudential 
requirements and prudential supervisory measures19. 

1.7 

Under the draft law, the resolution measures include reaching the conclusion that the conditions 

for  resolution  have  been  met,  deciding  to  use  one  or  more  resolution  tools  and  using  other 

resolution  powers  to  implement  the  resolution  tools.  The  resolution  tools  available  to  Banka 

Slovenije  include:  (i)  the  write-down  and  conversion  of  capital  instruments  tool;  (ii)  the  sale  of 

business  tool;  (iii)  the  bridge  institution  tool;  (iv)  the  asset  separation  tool;  and  (v)  the  bail-in 
tool 20. Moreover, Banka Slovenije also takes measures regarding asset management companies 

in relation to the asset separation tool and bridge banks in relation to the bail-in tool. 

1.8 

In  addition  to  the  provisions  already  cited,  the  draft  law  also  regulates  procedures  for  the 

compulsory  winding-up  of  banks.  Under  the  current  legal  framework,  Banka  Slovenije  is  the 

competent authority for the implementation of compulsory liquidation proceedings for banks and 

has  the  competence  to  initiate  bankruptcy  proceedings  in  relation  to  a  bank  with  the  relevant 
court21.  The  current  legal  framework  only  defines  general  powers  in  relation  to  liquidation  and 

bankruptcy proceedings, and refers to a reasonable use of the instruments generally available for 

insolvency  proceedings.  Under  the  draft  law  similar  powers  are  now  conferred  on  Banka 

Slovenije  for  the  winding-up  of  banks  –  the  administration  of  compulsory  liquidation  and  the 

initiation of judicial bankruptcy proceedings.  

1.9 

The  draft  law  revises  the  legal  framework  governing  compulsory  liquidation  and  bankruptcy 
proceedings  for  banks.22  In  particular,  it  aims  to  regulate  more  comprehensively  compulsory 

liquidation  powers  and  instruments.  Compulsory  liquidation  proceedings  will  always  be  initiated 

following  the  withdrawal  or  termination  of  a  bank’s  authorisation,  unless  a  bank  had  already 
fulfilled all of its obligations in relation to eligible deposits23. The aim of any compulsory liquidation 

proceedings  initiated  by  Banka  Slovenije  as  winding-up  proceedings  is  to  conclude  the  bank’s 

operations  and  to  repay  the  bank’s  obligations  vis-à-vis  depositors.  Under  the  draft  law,  if  the 

conditions  for  compulsory  liquidation  are  met,  Banka  Slovenije  will  initiate  the  proceedings, 

designate  one  or  more  liquidation  administrator  and  impose  limits  on  the  bank’s  business.  The 

18  

19  

20  
21  
22  
23  

Council Regulation (EU) No 1024/2013 of 15 October 2013 conferring specific tasks on the European Central Bank 
concerning policies relating to the prudential supervision of credit institutions (OJ L 287, 29.10.2013, p. 63). 
See Article 7(7) of the draft law. The ECB’s competences within the SSM are reflected also in other provisions of the 
draft law. 
See Article 25 of the draft law. 

See Article 8 and Chapter 3 (Article 145 et seq.) of the draft law.  
The rules are set out in the old Law on Banking (ZBan-1). 
The  deposit  guarantee  scheme  is  regulated  in  the  Law  on  the  deposit  guarantee  scheme  (ZSJV)  (Ur.  l.  RS 
No 27/16), on which the ECB recently issued Opinion CON/2016/6. 

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compulsory  liquidation  instruments  available  to  Banka  Slovenije  include:  (1)  the  sale  of  assets; 

(2) separation of assets; and (3) the sale of business. 

1.10  With respect to the regular insolvency proceedings of other entities over which  Banka Slovenije 

has  resolution  powers,  as  described  in  paragraph  1.3,  the  prior  consent  of  Banka  Slovenije  is 
required  under  the  draft  law  for  the  initiation  of  such  proceedings 24.  Banka  Slovenije  is  also 

competent to propose the initiation of insolvency proceedings regarding these entities should the 
conditions for their resolution not be met25. 

1.11 

Lastly,  the  draft  law  also  includes  an  amendment  concerning  the  conditions  for  appointing 
members of a bank’s supervisory  board 26. According to Article 53 of the Law  on  Banking  which 

governs such conditions, a person may be appointed as a member of a bank’s supervisory board 

if,  inter  alia,  they  enjoy  the  reputation  and  possess  the  qualities  required  to  supervise  the 

management of a bank’s operations. The draft law would add a provision stating that a person is 

deemed  not  to  enjoy  the  reputation  and  possess  the  qualities  required  to  supervise  the 

management  of  a  bank’s  operations  if  that  person  was  employed  in  a  bank  as  a  member  of  a 

bank’s  management  board,  a  member  of  a  bank’s  supervisory  board,  a  senior  executive  or  an 

employee  with  special  authorisation  for  representing  and  entering  into  business  relations  on 

behalf  of  and  in  the  name  of  an  individual  bank,  in  which  the  ratio  of  non-performing  claims 

relative  to  all  claims,  in  any  individual  period,  was  on  average  not  less  than  the  ratio  in  other 

banks  in  the  country  where  the  bank  is  operating,  or  was  on  average  not  less  than  the  ratio  in 

other banks in the European Economic and Monetary Union, as further specified in the draft law. 

2. 

Scope of the opinion 

The  opinion  focuses  on  (1)  the  insolvency  hierarchy  of  bank  creditors,  (2)  the  new  tasks  conferred  on 

Banka  Slovenije  as  the  resolution  authority  for  banks  and  other  financial  institutions  forming  part  of  a 

banking  group  and  (3)  specific  provisions  on  appointing  members  of  a  bank’s  supervisory  board.  The 

ECB stresses, however, that it does not opine on whether the draft law effectively implements Directive 

2014/59/EU  into  Slovenian  law.  In  this  respect,  so  far  as  concerns  the  new  tasks  conferred  on  Banka 

Slovenije,  the  ECB  focuses  on  those  provisions  that  may  impact  on  the  roles  and  tasks  of  Banka 

Slovenije as a central bank and as a member of the European System of Central Banks (ESCB), as well 

as  those  provisions  that  may  impact  the  specific  tasks  conferred  on  the  ECB  by  Regulation  (ΕU) 

No 1024/2013. 

3. 

Observations 

3.1  

Insolvency hierarchy of bank creditors 

3.1.1  The  draft  law  provides  for  a  preference  not  only  for  claims  arising  out  of  deposits  guaranteed 

under the deposit guarantee scheme (‘covered deposits’, or, as used in this opinion, ‘guaranteed 

24  
25  
26  

See Article 28 of the draft law. 
See Article 72(5) of the draft law. 
See Article 268(1) of the revised version of the draft law amending Article 53 of the Law on Banking (ZBan-2). 

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deposits’) and eligible deposits of natural persons and micro, small and medium-sized enterprises 
(SMEs), but also for other deposits, thereby providing for a general depositor preference 27. The 

draft law introduces some changes to the ranking of depositors, by ranking guaranteed deposits 

alongside  a  variety  of  claims  which  are  mandatorily  excluded 

from  bail-in  under 

Directive 2014/59/EU, including, for example, short-term interbank liabilities, liabilities arising out 

of payment systems, certain claims of trade creditors that are critical to a bank’s operations and 

liabilities  to  deposit  guarantee  schemes.  In  addition,  the  draft  law  ranks  eligible  deposits  from 

natural persons and microenterprises, SMEs below guaranteed deposits and the claims excluded 

from bail-in under Directive 2014/59/EU, but ahead of other deposits, which in turn rank ahead of 

unsecured  ordinary  claims.  The  ECB  also  notes  that  the  draft  law  subordinates  unsecured  and 

non-subordinated  claims  arising  from  debt  securities  and  other  similar  financial  instruments 

issued  by  a  bank  (hereinafter  referred  to  as  ‘unsecured  bank  debt  instruments’),  except  as 

regards  certain  structured  instruments,  to  unsecured  ordinary  claims,  whilst  ensuring  that  these 

claims are still ranked ahead of contractually subordinated claims. 

3.1.2  The ECB welcomes the fact that the draft law provides for a general depositor preference and the 

statutory  subordination  of  unsecured  bank  debt  instruments,  since  both  of  these  features  are 

expected  to  enhance  resolvability  by  providing  clarity  about  the  hierarchy  of  creditors  and 

enabling the allocation of losses to unsecured bank debt instruments without triggering concerns 

with regard to the principle that no creditor should be worse off in resolution than in insolvency. 

This  may  also  facilitate  the  application  of  the  bail-in  tool  to  unsecured  bank  debt  instruments 

ahead  of  operational  liabilities,  including,  for  example,  corporate  deposits  and  derivatives.  The 

bail-in  of  unsecured  bank  debt  instruments  is  regarded  as  carrying  a  lower  contagion  risk  than 
that  of operational  liabilities28,  which makes it likely  to  be more effective  and credible to market 

participants.  Facilitating  the  allocation  of  losses  to  the  holders  of  such  instruments  therefore 

fosters  effective  resolution  action  and  reduces  the  need  to  use  the  resolution  fund,  which  is 

expected  to  promote  an  adequate  pricing  of  risk  on  the  side  of  investors.  This  is  expected  to 
improve the resolvability of credit institutions and to enhance market discipline. 29 

3.1.3  Regarding  the  ranking  of  deposit  claims,  the  ECB  notes  that  the  draft  law  amends  Slovenia’s 

existing depositor preference rule by elevating certain other claims that are excluded from bail-in, 

so that they rank pari passu with guaranteed deposits, and above other deposit claims. The ECB 

understands that this is intended to allow for the mandatory exclusion of these claims from bail-in 

to  take  effect  without  triggering  ‘no  creditor  worse  off  than  in  insolvency’  concerns,  which  will 

facilitate resolution action. 

However,  a  distinction  should  be  made  insofar  as  this  change  relates  to  short-term  interbank 

liabilities,  which  also  represent  a  form  of  deposit.  It  is  questionable  whether  granting  interbank 

deposits an equally  preferred status as  guaranteed  deposits  is strictly  in line  with Article 108 of 

27   

28  

29  

It is noted that also the existing Slovenian law provides for a general depositor preference, however with a somewhat 
different scope of sub-ranking within the general depositor preference. 
See paragraph 3.2.2 of Opinion CON/2015/31; paragraph 3.7.1 of Opinion CON/2015/35; paragraph 3.1 of Opinion 
CON/2016/7.  

See paragraph 3.2.3 of Opinion CON/2015/31 and paragraph 3.1 of Opinion CON/2016/7. 

7 

                                                 
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Directive  2014/59/EU,  which  regulates  the  ‘ranking  of  deposits  in  insolvency  hierarchy’  and 

provides for a ‘super priority’ for guaranteed deposits and a ‘simple priority’ for eligible deposits of 

natural persons, microenterprises and SMEs. This clear ranking of depositors would be altered by 

granting  short-term  interbank  deposits  an  equally  high  preference  as  guaranteed  deposits,  and 

the  protection  of  guaranteed  deposits  and  of  eligible  deposits  of  natural  persons, 

microenterprises  and  SMEs  would  be  thereby  diluted.  This  situation  could  be  avoided  if  short-

term  interbank  deposits  were  considered  a  separate  creditor  category  and  were  allocated  a 

ranking below guaranteed deposits and eligible deposits of natural persons, microenterprises and 

SMEs.  

While  Article  108  of  Directive  2014/59/EU  regulates  the  ranking  of  different  categories  of 

depositors and their ranking compared to ordinary unsecured, non-preferred creditors, it does not 

prevent  Member  States  from  granting  a  preference  to  other  categories  of  claims  under  their 

insolvency law. As such, it is in accordance  with Article 108 for Member States to provide for a 

preference to other liabilities that are excluded from bail-in, by making them rank pari passu with 

guaranteed deposits. Such a provision may prove beneficial from a resolution perspective  when 

applying the bail-in tool for the abovementioned reasons. However, the ECB would underline the 

fact  that  when  conferring  additional  preferences  on  other  classes  of  claims,  Member  States 

should be mindful of not overly diluting the preferred status of depositors under Article 108, which 

is  notably  intended  to  provide  a  certain  level  of  protection  for  the  deposits  of  natural  persons, 

microenterprises  and  SMEs  holding  eligible  deposits  in  excess  of  the  level  of  guaranteed 

deposits.  In  addition,  Article  108  is  intended  to  ensure  that  the  claims  of  guaranteed  deposits 

(and deposit guarantee schemes) should have an even higher ranking under national insolvency 
law30. From a financial stability  perspective,  this  depositor preference reduces the risks of bank 

runs,  potential  losses  of  the  guaranteed  depositors  in  a  liquidation  phase,  as  well  as  the 
excessive  depletion  of  the  DGS31.  Furthermore,  it  should  be  carefully  assessed  whether  the 

preferred  ranking  of  other  liabilities  alongside  guaranteed  deposits,  could  complicate  the 

application  of  other  resolution  tools,  such  as  the  sale-of-business  or  bridge  bank  tool.  This  is 

especially  relevant  where  the  resolution  strategy  is  to  carve  out  and  transfer  the  deposit  book 

while leaving the other liabilities in the ‘old bank’ which will then enter into liquidation. 

3.1.4  Regarding the statutory subordination of unsecured bank debt instruments and its positive impact 

on  the  eligibility  of  these  instruments  for  the  purpose  of  total  loss-absorbing  capacity  (TLAC) 

under the Financial Stability Board’s TLAC term sheet, the ECB also notes that, in principle, the 

same  considerations  apply  here  as  raised  in  its  earlier  opinion  on  the  German  Law  on  bank 
resolution 32.  The  ECB  notes,  however,  that  there  is  currently  no  global  systemically  important 

bank established in Slovenia, to which the TLAC requirement would apply. 

3.1.5  The ECB welcomes the additional degree of precision introduced by the draft law with respect to 

the  respective  ranking  of  contractually  subordinated  claims  arising  out  of,  inter  alia,  Tier  1  and 

Tier 2 capital instruments. 

30  
31  
32  

See Recital 111 of Directive 2014/59/EU. 
See paragraph 8.2 of Opinion CON/2012/99. 

See paragraphs 3.2.4 and 3.2.5 of Opinion CON/2015/31. 

8 

                                                 
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3.1.6  As regards the legal drafting of the draft law, the ECB would recommend that, instead of using a 

cross-reference  to  Article  80(2)  when  referring  to  liabilities  that  are  excluded  from  bail-in,  legal 

certainty  would  be  enhanced  if  such  liabilities  were  explicitly  listed  in  the  insolvency  ranking 

instead.  This  would  also  serve  to  further  clarify  whether  some  of  the  respective  liabilities  fall 

under the rank of priority claims or secured claims or whether they will be fully separated as the 

property of third persons, and whether, for example, in the event of an underlying obligation to a 

secured claim not being fully covered by the value of the security provided, the uncovered part of 

the  claim  would  be  categorised  as  an  unsecured  ordinary  claim.  Similarly,  concerning  the 

treatment of structured instruments, in particular instruments that may qualify as debt securities, 

the  ECB  would  also  recommend  enhancing  the  clarity  of  the  drafting  of  the  draft  law  to  further 

promote legal certainty in the ranking of creditors’ claims.  

3.1.7  A common framework at Union  level on the  hierarchy of creditors and notably the  scope of the 

depositor preference and the degree of subordination of debt securities and other similar financial 

instruments  in  bank  resolution  and/or  insolvency  proceedings  may  help  to  advance  the 

integration of the financial services markets within the Union and facilitate the tasks of the ECB 
both with regard to monetary policy and to supervision within the SSM 33. 

3.2 

Conferral of new resolution tasks on Banka Slovenije 

3.2.1  The ECB welcomes the draft law’s resolution-related provisions, as they strengthen the tools and 

procedures available to Banka Slovenije to carry out effective resolution in line with the common 

framework of intervention powers, rules and procedures laid down in Directive 2014/59/EU. 

3.2.2  The  ECB  has  developed  guidance,  as  set  out  in  paragraphs  3.2.3  and  3.2.4,  on  the  basis  of 

which it may decide whether a new task conferred on an ESCB national central bank (NCB) is to 

be considered a central banking task or a governmental task for the purposes of assessing  the 

conferral  of  such  a  task  against  the  prohibition  of  monetary  financing  under  Article  123  of  the 
Treaty34. This guidance applies to genuinely new tasks that either did not exist in the past or did 

not form an integral part of the central banking tasks previously assigned to the NCB in question. 

The  tasks  currently  discharged  by  an  NCB  as  central  banking  tasks  are  not  reviewed  and  re-

categorised, but may be reassessed if they are subject to substantive legislative amendments. In 

this regard, the ECB notes that, already in the past, Banka Slovenije has had extensive powers to 

take specific resolution measures in relation to credit institutions. The draft law, however, extends 

the existing resolution powers and responsibilities of Banka Slovenije, as it is designated as the 

resolution  authority  not  only  for  credit  institutions,  but  also  for  other  financial  institutions  as 

described  in  paragraph  1.3.  The  draft  law  should  therefore  be  assessed  in  the  light  of  the 

prohibition of monetary financing.  The concrete assessment of whether  Banka Slovenije’s tasks 

as  the  resolution  authority  for  financial  institutions  forming  part  of  a  banking  group  is  to  be 

considered a central banking task or a governmental task is undertaken in paragraph 3.2.5 of this 

opinion. 

33  
34  

See paragraph 3.4 of Opinion CON/2015/31 and paragraph 3.7.3 of CON/2015/35. 

See paragraph 2.3 of Opinion CON/2015/22.  

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3.2.3  First, the principle  of financial  independence requires that the Member States may  not  put their 

NCBs  in  a  position  where  they  have  insufficient  financial  resources  to  carry  out  their  ESCB-  or 
Eurosystem-related tasks, as applicable 35.  

Second,  central  banking  tasks  comprise  in  particular  those  tasks  that  are  related  to  the  tasks 

listed in Article 127(2), (5) and (6) of the Treaty. 

Third,  new  tasks  conferred  on  an  NCB  that  are  atypical  of  NCBs’  tasks,  or  which  are  clearly 

discharged on behalf of and in the exclusive interest of the government or of other public entities, 

should  be  considered  as  governmental  tasks.  In  that  context,  a  distinction  should  be  drawn 

between the liquidity- and solvency-related tasks of NCBs. While, for the purposes of assessing 

compliance  with  the  monetary  financing  prohibition,  solvency  support  is  a  governmental  task, 

liquidity-related  tasks,  the  ultimate  objective  of  which  is  to  finance  the  economy,  are  central 

banking tasks. 

Resolution  tasks  may  be  considered  to  be  central  banking  tasks,  provided  that  they  do  not 

undermine  an  NCB’s  independence  in  accordance  with  Article  130  of  the  Treaty.  However,  the 

discharge of these tasks by central banks may not extend to the financing of resolution funds or 

other  financial  arrangements  related  to  resolution  proceedings  as  these  are  governmental 
tasks36. This is without prejudice to the possibility that: (a) central banks may provide short-term 

financing  to  deposit  guarantee  schemes  under  certain  conditions;  and  (b)  NCBs  may  provide 

emergency liquidity assistance to solvent credit institutions. 

3.2.4   An important criterion for qualifying a new task as a governmental task is therefore the impact of 

the  task  on  the  institutional,  financial  and  personal  independence  of  the  NCB.  In  particular,  the 

following should be taken into account. 

First,  it  should  be  assessed  whether  the  performance  of  the  new  task  creates  inadequately 

addressed  conflicts  of  interests  with  existing  central  banking  tasks,  and  does  not  necessarily 

complement those existing central banking tasks. If a conflict of interest arises between existing 

and new tasks, there should be sufficient mitigation in place to adequately address that conflict. 

Complementarity between the new task and existing central banking tasks should not, however, 

be interpreted  extensively,  so as to  lead to  the creation of an  indefinite chain  of ancillary tasks. 

Complementarity should also be examined from the point of view of the financing of those tasks. 

Second,  it should be assessed whether  without  new  financial resources the  performance of the 

new  task  is  disproportionate  to  the  financial  or  organisational  capacity  of  the  NCB  and  may 

negatively impact on its capacity to properly perform existing central banking tasks. 

Third,  it  should  be  assessed  whether  the  performance  of  the  new  task  fits  into  the  institutional 

set-up of the NCB in the light of central bank independence and accountability considerations. 

Fourth, it should be assessed whether the performance of the new task would entail substantial 

financial risks. 

35  
36  

See paragraph 2.2.1 of Opinion CON/2015/37. 
See paragraph 2.3.2 of Opinion CON/2015/22. 

10 

                                                 
ECB-PUBLIC 

Fifth,  it should be  assessed  whether the performance of the new task exposes the members of 

the  NCB’s  decision-making  bodies  to  political  risks  which  are  disproportionate  and  may  also 

impact  on  their  personal  independence  and,  in  particular,  the  guarantee  of  the  term  of  office 

under Article 14.2 of the Statute of the European System of Central Banks and of the European 

Central Bank. 

Any  final  assessment  on  the  qualification  of  a  task  given  to  an  NCB  as  either  falling  within  the 

scope of a central banking task or a governmental task will be guided by the objective of ensuring 

the consistent application of the prohibition of monetary financing within the Eurosystem and the 

ESCB to the extent that it applies to its members. 

3.2.5  As  noted  in  paragraph  3.2.2,  the  draft  law  also  designates  Banka  Slovenije  as  the  resolution 

authority for financial institutions which are part of a banking group. In the light of the guidance in 

paragraphs  3.2.3  and  3.2.4,  an  assessment  must  therefore  be  made  as  to  whether  Banka 

Slovenije’s new tasks and responsibilities in this field could constitute a breach of the prohibition 

of monetary financing.  

3.2.5.1  Principle of financial independence  

The principle of financial independence requires NCBs to have sufficient means to carry out not 

only  their  ESCB-related  tasks  from  an  operational  and  financial  point  of  view,  but  also  their 
national tasks37. In this respect the ECB notes that, under the draft law, banks and branches of 

Union  banks  established  in  Slovenia  are  required  to  pay  an  annual  fee  in  relation  to  Banka 
Slovenije’s  resolution  tasks38.  Moreover,  in  order  to  safeguard  Banka  Slovenije’s  financial 

independence,  the  provisions  of  the  draft  law  authorise  Banka  Slovenije,  in  its  capacity  as 

resolution  authority,  to  require  institutions  to  reimburse  all  operational  expenditure  and  costs 
incurred during the performance of its responsibilities and powers in relation to resolution39.  

3.2.5.2  Links to tasks listed in Article 127(2), (5) and (6) of the Treaty  

Administrative  resolution  tasks  are  considered  to  be  tasks  related  to  those  referred  to  in 

Article 127(5) of the Treaty, based on the understanding that administrative resolution tasks and 

supervisory  tasks  complement  each  other.  In  the  case  of  the  extension  of  Banka  Slovenije’s 

resolution-related  responsibilities  to  other  financial  institutions  forming  part  of  a  banking  group, 

such new tasks may also be considered to be related to tasks under Article 127(5) of the Treaty, 

by  analogy  with  the  complementarity  of  Banka  Slovenije’s  resolution  tasks  in  respect  of  credit 

institutions with its existing supervisory and financial stability tasks. 

3.2.5.3  Atypical tasks 

A number of Member States have conferred on their NCBs a significant role in the resolution of 

credit and financial institutions, whether as the resolution authority or as a competent supervisory 

authority. The ECB has generally accepted the allocation of such tasks to NCBs provided they do 

not  interfere  financially  and  operationally  with  the  performance  of  the  NCB’s  ESCB-related 

37  
38  
39  

See the ECB’s 2014 Convergence Report, p. 25. 
See Article 14 (1) of the draft law. 

See Article 15 (1) of the draft law. 

11 

                                                 
ECB-PUBLIC 

tasks40.  The  new  resolution  tasks  of  Banka  Slovenije  in  respect  of  other  financial  institutions 

forming part of a banking group can therefore be regarded as being tasks not atypical of a central 

bank, particularly if, as in the case of Banka Slovenije, it already had responsibilities and tools for 

intervening in relation to distressed financial institutions that pose a risk to financial stability. 

3.2.5.4  Discharge of tasks on behalf of and in the exclusive interest of the Government or of other public 

entities 

Whilst  Banka  Slovenije  is  designated  as  the  sole  resolution  authority  and  takes  resolution 

measures acting as an administrative authority exercising a public functions in its own name, and 

not  on  behalf  of  any  other  authority,  it  is  required,  before  placing  a  credit  or  financial  institution 

into  resolution  or  taking  any  other  resolution  action,  to:  (i)  inform  the  Ministry  of  Finance  and 

obtain the prior approval of the Government if the decision would entail additional public financing 
and (ii) to inform the Ministry of Finance where there are systemic implications 41. This provision 

implements  Article  3(6)  of  Directive  2014/59/EU  and  ensures  that  Banka  Slovenije  has  control 

over  any  decision  related  to  a  resolution  matter  that  could  affect  Banka  Slovenije’s  financial 

independence.  There  is  no  indication  that  in  discharging  its  resolution  function  Banka  Slovenije 

acts exclusively in the interest of another public entity.  

3.2.5.5  Extent to which conflicts of interest with existing tasks are addressed 

Pursuant to the draft law, Banka Slovenije must adopt and publish all of its relevant internal rules 

in  order  to  ensure  that  there  is  no  conflict  of  interest,  and  to  ensure  the  operational  and 

organisational  independence  of  the  organisational  unit  carrying  out  resolution  functions  from 
Banka Slovenije’s other tasks42. The ECB expects Banka Slovenije’s internal rules to adequately 

address potential conflicts of interest between Banka Slovenije’s resolution function and its other 

tasks,  particularly  its  tasks  related  to  the  supervision  of  credit  institutions  and  other  financial 

institutions.  

3.2.5.6  Extent  to  which  the  performance  of  tasks  is  proportionate  to  Banka  Slovenije’s  financial  and 

operational capacity and its ability to perform its ESCB-related tasks 

The ECB welcomes the fact that Banka Slovenije may recover the expenses incurred in carrying 
out its resolution tasks from the institutions concerned. 43 

3.2.5.7  Extent to which the performance of tasks entails substantial financial risks 

With regard to the Banka Slovenije’s liability, the draft law stipulates that Banka Slovenije and its 

staff  must  act  with  the  diligence  of  a  ‘good  expert’.  Banka  Slovenije  will  be  held  liable  for  any 

damages that occur as a result of a breach of this obligation, and the draft law does not contain 

provisions  excluding  or  limiting  the  liability  of  Banka  Slovenije  in  this  respect.  By  contrast,  the 

draft  law  does  provide  that  the  liability  of  Banka  Slovenije’s  staff  is  limited  to  acts  of  gross 

40  

41  
42  
43  

See  paragraphs  2.1  and  3.4.3  of  Opinion  CON/2016/5,  paragraphs  2.1  and  2.3  and  paragraph  3.2.4  of  Opinion 
CON/2015/22,  paragraph  4.1  of  Opinion  CON/2014/60,  paragraph  2.1  of  Opinion  CON/2013/73,  paragraph  2.3  of 
Opinion CON/2011/72, paragraph 2.2 of Opinion CON/2011/83, and paragraph 2.2 of Opinion CON/2011/39.  
See Article 22 of the draft law. 
See Article 7 of the draft law. 

See Article 15 of draft law. 

12 

                                                 
ECB-PUBLIC 

negligence  or  wilful  misconduct  in  the  performance  of  their  functions.  In  such  cases,  Banka 

Slovenije  will  pay  the  injured  party  for  any  damages  that  result  from  its  staff  member’s  gross 

negligence  or  wilful  misconduct  and  Banka  Slovenije  will  then  will  require  the  staff  member  to 
reimburse  it  for  any  money  paid  out  to  the  injured  party44.  In  the  light  of  this  difference  in 

approach,  it  might  be  worth  considering  whether  Banka  Slovenije’s  institutional  liability  should 

also  be  confined  to  acts  of  gross  negligence  or  wilful  misconduct,  as  is  the  case  for  Banka 
Slovenije’s staff45. 

3.2.5.8  Conclusion 

The  ECB  considers  that  there  are  grounds  for  regarding  Banka  Slovenije’s  extended  resolution 

tasks  as  central  banking  tasks,  in  the  sense  that  they  complement  Banka  Slovenije’s  existing 

supervisory  and  resolution  functions.  The  fact  that  Banka  Slovenije  may  require  financial 

institutions to pay for any  operational  expenditure and costs incurred during the performance of 

its  responsibilities  safeguards  Banka  Slovenije’s  financial  independence  and  has  a  positive 

impact  on  Banka  Slovenije’s  financial  capacity  to  assume  the  extended  tasks.    However,  given 

that  potential  liability  issues  represent  a  substantial  financial  risk  for  Banka  Slovenije,  the  ECB 

suggests that Banka Slovenije’s institutional liability should be usefully confined to acts of gross 

negligence  or  wilful  misconduct,  similar  to  the  standard  applicable  to  the  liability  of  Banka 

Slovenije’s staff. 

3.2.6  Resolution planning  

The  draft  law  stipulates  that  when  Banka  Slovenije  evaluates  resolution  plans  for  specific 

institutions,  it  must  not  assume  that  extraordinary  public  financial  support  will  be  granted,  other 

than the use of resources from the resolution fund. The draft law further clarifies that there must 

be  no  assumption  that  any  special  liquidity  loan  or  any  other  liquidity  assistance  from  Banka 
Slovenije based on non-standard collateralisation, tenor and interest rate terms, will be granted46. 

While  this  appears  to  be  in  line  with  the  requirements  of  Directive  2014/59/EU,  the  ECB 

emphasises  that  these  provisions  do  not  in  any  way  affect  Banka  Slovenije’s  competence  to 

decide, independently and at its full discretion, on the provision of central bank liquidity to solvent 

institutions,  both 
assistance, within the limits imposed by the prohibition of monetary financing under the Treaty47. 

through  standard  monetary  policy  operations  and  emergency 

liquidity 

3.3 

Appointment of members of a bank’s supervisory board 

The  explanatory  memorandum  to  the  draft  law  states  that  the  amendment  pursuant  to  which  a 

person who held a senior position in a bank, which has accumulated a higher than average level 

of non-performing claims, may not be considered to have the necessary reputation and qualities 

to  be  a  member  of  the  bank’s  supervisory  board,  is  intended  to  ensure  that  the  composition  of 

banks’ supervisory boards will be of a higher quality. According to the explanatory memorandum, 

this  provision  should  result  in  the  more  stable  and  efficient  functioning  of  banks  and  an 

44  
45  
46  
47  

See Article 16 of draft law. 
See paragraph 3.4.7 of Opinion CON/2016/5. 
See Article 29(3) of the draft law. 

See paragraph 3.2 of Opinion CON/2012/99 and paragraph 3.3 of Opinion CON/2014/67. 

13 

                                                 
ECB-PUBLIC 

improvement to the entire Slovenian banking system. The ECB notes that the amendment does 

not  appear  to  leave  any  discretion.  Applying  this  provision  in  such  a  formulaic  manner  without 

leaving  any  discretion  might  raise  concerns  with  regard  to  whether  the  new  amendment  is 

proportionate to what is necessary to achieve its objectives. Furthermore, the consulting authority 

is invited to consider whether the provision might be open to legal challenge. 

This opinion will be published on the ECB’s website.  

Done at Frankfurt am Main, 3 May 2016. 

[signed] 

The President of the ECB 

Mario DRAGHI 

14