Opinion of the European Central Bank of 12 May 2017 on judicial relief granted to holders of qualified bank credit (CON/2017/16)
Date: 2017-05-12
Institutions: European Central Bank
Subjects: Slovenia, action brought before an administrative court, bank, central bank, indemnification, national law

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 12 May 2017  

on judicial relief granted to holders of qualified bank credit 

(CON/2017/16) 

Introduction and legal basis 

On 15 March 2017 the European Central Bank (ECB) received a request from the Slovenian Ministry of 

Finance  for  an  opinion  on  a  draft  Act  on  judicial  relief  granted  to  holders  of  qualified  bank  credit 

(hereinafter 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 indent of Article 2(1) of Council Decision 98/415/EC1 as 

the draft law relates to a national central bank. 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  main  objective  of  the  draft  law  is  to  remedy  the  unconstitutionality,  as  declared  by  the 

Slovenian Constitutional Court, of certain provisions of the Slovenian Banking Act (hereinafter the 
‘ZBan-1’)2 governing Banka Slovenije’s liability for damages with respect to extraordinary measures 

imposed by Banka Slovenije. ZBan-1 authorised Banka Slovenije to adopt extraordinary measures 

to write-down or convert qualified liabilities during the reorganisation  of banks that failed, or were 

likely  to  fail,  to  meet  the  minimum  requirements  for  capital  and  liquidity  to  an  extent  that  would 

justify the withdrawal of their banking authorisation.  

1.2  While  the  Constitutional  Court  confirmed  that  the  legal  basis  for  the  extraordinary  measures 

imposed  in  2013  and  2014  by  Banka  Slovenije  in  respect  of  the  write-down  of  subordinated 

instruments  was  in  accordance  with  the  Constitution  of  the  Republic  of  Slovenia,  it  nevertheless 

declared the provisions of Article 350.a of the ZBan-1 to be unconstitutional. This conclusion was 

based on the Constitutional Court’s finding that exercising judicial relief under Article 350.a of the 

ZBan-1  did  not  afford  effective  judicial  protection  to  stakeholders  affected  by  Banka  Slovenije’s 

extraordinary  measures.  The  Constitutional  Court  decided  that  the  legislator  must  remedy  the 

unconstitutionality  within  six  months  of  the  publication  of  the  Constitutional  Court’s  decision,  and 

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2 

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). 
Banking Act (Zakon o bančništvu), Official Gazette of the Republic of Slovenia no 131/06. 

 
 
 
                                                 
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provided  the  legislator  with  further  guidance  on  how  best  to  ensure  more  effective  judicial 

protection. 

1.3  Shareholders  and  creditors  affected  by  Banka  Slovenije’s  extraordinary  measures  are  eligible  to 

seek compensation  under  the draft law, provided that the measures resulted in a less favourable 
treatment  of  their  qualified  liabilities  compared  to  insolvency  or  regular  liquidation  proceedings3 

initiated  on  the  day  the  extraordinary  measures  were  imposed  (the  ‘no  creditor  worse  off 
principle’)4. 

1.4  Compensation for damages incurred as a result of the extraordinary measures must be paid either 

by Banka Slovenije or the State. If no liability can be attributed to Banka Slovenije, compensation 

must  be  paid  by  the  State.  In  particular,  Banka  Slovenije  will  be  partially  or  wholly  exempt  from 

liability  if  it  can  demonstrate  that  it  acted  with  due  professional  care  when  adopting  the 

extraordinary measures and  had,  in the light of the facts and circumstances available at the  time 

the  extraordinary  measures  were  adopted,  reasonable  grounds  to  believe  that  the  statutory 

conditions  for  taking  the  extraordinary  measures  were  fulfilled.  If Banka  Slovenije  is  only  partially 

exempt  from  liability,  then  Banka  Slovenije  must  pay  damages  to  former  holders  of  qualified 

liabilities,  whereas  financial  resources  for  any  compensation  exceeding  Banka  Slovenije’s  liability 

must be provided by the State within three months of the publication of the court’s decision in the 

Slovenian Official Journal.  

1.5  Any  claim  for  compensation  must  be  filed  against  Banka  Slovenije  and  the  Republic  of  Slovenia 

within  six  months  of  the  draft  law  entering  into  force.  Such  claims  may  be  filed  by  applicants 

holding more than 10 % of the respective bank’s share capital or having a claim of more than EUR 

100  000  against  the  respective  bank.  The  draft  law  codifies  special  procedural  rules  of  judicial 

redress  for  the  holders  of  qualified  liabilities,  which  deviate  from  the  general  rules  of  civil 

proceedings and, inter alia, enable legal proceedings affecting similarly-placed litigants to be joined 

together  to  achieve  a  joint  and  uniform  assessment  of  claims  regarding  a  specific  bank  that  was 

subject to Banka Slovenije’s extraordinary measures. 

1.6  When  determining  whether  a  claimant  has  a  right  to  compensation,  the  court  must  establish 

whether extraordinary measures relating to qualified liabilities were adopted by Banka Slovenije in 

accordance with the conditions laid down in the ZBan-1. The court must, inter alia, verify whether 

the complex assessment of the conditions necessary for imposing extraordinary measures, as laid 

down  in  Article  253.a  of  the  ZBan-1,  including  the  respective  bank’s  asset  quality  review  (AQR), 

was  correctly  carried  out  or  not.  The  main  aspects  that  the  court  will  verify  are  whether:  (1)  the 

methods  and  the  assumptions  underlying  the  methods  used  in  the  complex  assessment  of  the 

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Such proceedings may be applied if the bank’s assets are sufficient to repay all its creditors. 
According to the no creditor worse off (NCWO) principle no creditor or shareholder should incur greater losses than 
they  would  have  incurred  if  the  institution  had  been  wound  up  under  normal  insolvency  proceedings.  The  NCWO 
principle is defined under Article 34/1(g) of 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).  

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conditions for imposing extraordinary measures and in the AQR were consistent with Union rules 

on  State  aid  and  the  banking  supervision  standards  adopted  by  the  ECB,  the  European 

Commission  and  the  European  Banking  Authority  (EBA);  (2)  the  method  and  the  assumptions 

underlying  such  methods  were  applied  improperly  and  whether  this  affected  the  outcome  of  the 

assessment; (3) there are reasonable grounds to suspect that either the original data was not used 

in  the  assessment  or  that  the  individual  responsible  for  appraising  the  bank’s  assets  did  not  act 

independently; and (4) there is reasonable doubt concerning the professional skills of the entity that 

performed the valuation of the bank’s assets.  

1.7 

In the event of a dispute regarding the fulfilment of the conditions for the extraordinary measures, 

the  burden  of  proof  lies  with  Banka  Slovenije.  For  complex  questions  requiring  specialist 

knowledge  the  court  may,  either  in  addition  to,  or  instead  of,  an  expert  appointed  in  accordance 

with the rules of civil proceedings, appoint a special committee of experts composed of three to five 

members  selected  through  a  public  tender  procedure,  which  will  act  as  an  advisory  body  to  the 

court.  The  European  Commission,  the  ECB  and  the  EBA  will  be  informed  of  the  public  tender 

procedure by the court.  

1.8  The draft law lays down rules for a two-stage disclosure of documents and information in relation to 

any decision on extraordinary measures adopted by Banka Slovenije. These rules state that Banka 

Slovenije must publish on its website: (1) any decision imposing an extraordinary measure, (2) the 

valuation of assets for each bank in respect of which an extraordinary measure was taken, (3) the 

AQR  report  for  each  bank  in  respect  of  which  an  extraordinary  measure  was  taken  and  (4)  any 

documents revealing a contractual relationship between Banka Slovenije and the appraiser of the 

bank’s  assets.  All  personal  and  confidential  information  must  be  redacted  in  advance  of  any 

publication on Banka Slovenije’s website. Furthermore, the applicants may file a motion to the court 

to  oblige  Banka  Slovenije  (and  certain  other  entities,  such  the  State,  the  Court  of  Audit,  the 

Securities  Market  Agency  and  the  bank  affected  by  the  extraordinary  measure)  to  provide 

documents  to  the  court  without  redacting  personal  or  confidential  information,  whereby  the  court 

must limit any disclosure of evidence to that which is proportionate and must ensure the adoption 
of  effective  measures  to  protect  such  information5,  for  example  by  excluding  the  public  from  the 

court’s proceedings, limiting the review to certain entities, and similar measures. 

1.9 

If the court determines that former holders of qualified liabilities have a right to be compensated, its 

decision will be published in the Official Journal and will have an erga omnes effect, meaning that 

the  decision  will  impact  all  former  stakeholders  affected  by  Banka  Slovenije’s  extraordinary 

measures,  regardless  of  whether  they  filed  a  claim  to  recover    damages  or  not.  The  decision 

granting the right to compensation to former holders of qualified liabilities will be general in nature 

and  will  indicate  how  qualified  liabilities  should  be  treated  and  determine  the  extent  of  Banka 

5  

The  draft  law’s  provisions  on  access  to  information  are  derived  from  Article  5  of  Directive  2014/104/EU  of  the 
European Parliament and of the Council of 26 November 2014 on certain rules governing actions for damages under 
national  law  for  infringements  of  the  competition  law  provisions  of  the  Member  States  and  of  the  European  Union 
(OJ L 349, 5.12.2014, p.1). 

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Slovenije’s  liability.  Thus,  the  court  will  not  issue  separate  decisions  awarding  compensation  to 

each individual stakeholder. Instead, the draft law provides a standardised formula for calculating 

compensation  to  be  paid  by  Banka  Slovenije  based  on  a  written  request  from  former  holders  of 

qualified  liabilities.  The  request  may  be  submitted  15  days  after  the  publication  of  the  court’s 

decision in the Slovenian Official Journal. The same applies if the Republic of Slovenia is liable to 

pay the compensation, in which case the compensation will be paid by the Ministry of Finance. The 

right to seek payment on the basis of the court’s decision is limited in time and expires five years 

from the date of publication of the final court decision granting the right to compensation to former 

holders of qualified liabilities. 

2. 

Observations 

2.1  The draft law must comply with Article 123 of the Treaty, which prohibits overdraft facilities and any 

other type of credit facility with the national central banks of Member States in favour of the public 

sector,  including  central  governments  or  other  public  authorities.  Article  1(1)(b)(ii)  of  Council 
Regulation (EC) No 3603/936 defines ‘other type of credit facility’, inter alia, as ‘any financing of the 

public sector’s obligations vis-à-vis third parties’. Consequently, a requirement that Banka Slovenije 

must pay the compensation for damages, to the extent that it results in Banka Slovenije assuming 
the liability of the State7, would not be in line with the monetary financing prohibition laid down in 
Article 123 of the Treaty.8 Even if Banka Slovenije were to be reimbursed by the State within three 

months  of  the  publication  of  the  court’s  decision  for  any  amounts  paid  as  compensation,  the 

financing of the State’s obligation during this period would qualify as an ‘other type of credit facility’ 

granted  by  Banka  Slovenije  to  the  State,  and  as  such  would  violate  the  monetary  financing 

prohibition. Therefore, the draft law  should  be  amended to  ensure that Banka  Slovenije  does  not 

assume any liability of the State, including, in particular, in cases where both Banka Slovenije and 

the  State  are  severally  liable.  Banka  Slovenije  should  only  be  liable  in  respect  of  its  individual 

responsibility.  

2.2 

In order to provide effective judicial protection to the holders of qualified liabilities by allowing them 

to  examine  any  relevant  facts  before  bringing  a  claim  to  court,  it  is  appreciated  that  there  is  a 

requirement  to  disclose  documents  that  formed  the  basis  for  Banka  Slovenije’s  decision  on 

extraordinary measures.  

2.3  Article  14(4),  point  5  of  the  ZBan-29,  stipulates  that  if  it  is  specifically  required  by  law,  Banka 

Slovenije  must  disclose  confidential  information  to  the  public.  However,  such  national  legislation 

should fully respect the provisions of Directive 2013/36/EU of the European Parliament and of the 

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7 
8  

9  

Council  Regulation  (EC)  No  3603/93  of  13  December  1993  specifying  definitions  for  the  application  of  the 
prohibitions referred to in Articles 104 and 104b(1) of the Treaty (OJ L 332, 31.12.1993, p. 1). 
See Article 4 of the draft law. 
See for example paragraph 3.2.3 of Opinion CON/2010/33 and paragraph 4.2(d) of Opinion CON/2008/16, all ECB 
opinions are available on the ECB’s website at www.ecb.europa.eu . 
Banking Act (Zakon o bančništvu), Official Gazette of the Republic of Slovenia, no. 25/15, 44/16 and 77/16.  

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Council10 as regards professional secrecy. In this context the ECB notes that, notwithstanding the 

requirement  under  the  draft  law  to  redact  personal  and  confidential  information  prior  to  any 

disclosure  of  information  on  Banka  Slovenije’s  website,  the  asset  valuations  and  AQR  reports 

relating to individual supervised entities (banks) are to be regarded as confidential information. In 

addition,  these  documents  may  contain  confidential  information  pertaining  to  each  bank’s 

customers or other counterparties, which have been obtained by Banka Slovenije from the banks 
and external service providers through the exercise of its supervisory powers11. Public disclosure of 

such  documents  would  thus  inevitably  contravene  the  principle  set  out  in  Article  53  of  Directive 
2013/36/EU12, according  to  which  all  persons  working  for  competent  supervisory  authorities  must 

be  bound  by  the  obligation  of  professional  secrecy.  Confidential  information  which  such  persons 

receive  in  the  course  of  their  duties  may  be  disclosed  only  in  summary  or  aggregate  form,  thus 

individual  credit  institutions  may  not  be  identified,  without  prejudice  to  cases  covered  by  criminal 

law. 

2.4 

In order to establish a framework which safeguards both confidential information and the legitimate 

interest of investors affected by Banka Slovenije’s extraordinary measures, the ECB recommends 

that an alternative approach should be considered, which would comply with the principles set out 

in Article 53 and Article 54 of Directive 2013/36/EU. In order to ensure the adequate protection of 

confidential supervisory information and to safeguard the principles set out in Article 53 of Directive 

2013/36/EU, the disclosure of the asset valuations and AQR reports should be limited only to the 

shareholders or creditors who were directly affected by the extraordinary measures taken by Banka 

Slovenije and therefore have a legitimate legal interest as defined by the Constitutional Court of the 

Republic of Slovenia.  

2.5  Regarding the draft law’s requirement to verify that the methods and assumptions used to assess 

whether the extraordinary measures and the results of the AQR were consistent with the standards 

of  banking  supervision  adopted  by  the  ECB,  the  European  Commission  and  the  EBA,  it  is  noted 

that in order to provide legal certainty the draft law should specify in more detail the relevant legal 

sources (e.g. legal acts and best supervisory practices) relevant in this context. 

2.6  The ECB takes note that, pursuant to the draft law,  the European Commission, the ECB and the 

EBA will be informed by the court of the public tender procedure for the appointment of a special 

committee  of  experts  to  act  as  an  advisory  body  to  the  court  for  complex  questions  requiring 

specialist knowledge. On the understanding that the scope of the judicial review, and therefore the 

review by the special committee of experts, would be limited to explain facts, and taking account of 

the above-mentioned suggestion that the draft law should specify in more detail the relevant legal 

sources to be considered when assessing whether the extraordinary measures and the results of 

10  

11  

12  

Directive 2013/36/EU of  the  European  Parliament and of  the Council of 26  June 2013 on access  to  the activity  of 
credit  institutions  and  the  prudential  supervision  of  credit  institutions  and  investment  firms,  amending  Directive 
2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC (OJ L 176, 27.6.2013, p. 338). 
On the basis of Articles 53 of Directive 2013/36/EU and Article 14 of ZBan-2, Banka Slovenije is obliged to treat all 
information regarding supervised entities that was acquired in the course of its supervisory duties as confidential. 
See footnote 11. 

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the  AQR  were  consistent  with  the  banking  supervision  standards  of  the  ECB,  European 

Commission and EBA, the ECB stands ready, at its discretion, to cooperate with the court, taking 

account of the principle of sincere cooperation between the Union and the Member States pursuant 

to Article 4(3) of the Treaty on European Union and the co-operation between the institutions of the 

Union and the responsible authorities of the Member States pursuant to Article 18 of Protocol (No 

7) on the privileges and immunities of the European Union. 

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

Done at Frankfurt am Main, 12 May 2017. 

[signed] 

The President of the ECB 

Mario DRAGHI 

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