Opinion of the European Central Bank of 18 July 2019 on the conversion of Swiss franc loans (CON/2019/27)
Date: 2019-07-18
Institutions: European Central Bank
Subjects: Slovenia, consumer credit, conversion rate, credit institution, debt, financial stability, financial supervision, foreign currency, national law

EN 

ECB-PUBLIC  

OPINION OF THE EUROPEAN CENTRAL BANK 

of 18 July 2019  

on the conversion of Swiss franc loans 

(CON/2019/27) 

Introduction and legal basis 

On 15 May 2019 the European Central Bank (ECB) received a request from the National Assembly of the 

Republic  of  Slovenia  (hereinafter  the  ‘National  Assembly’)  for  an  opinion  on  a  draft  law  on  relations 

between lenders and borrowers concerning credit agreements in Swiss francs (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  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. 

Purpose of the draft law 

1.1  The purpose of the draft law is to restructure consumer loans denominated in, or linked to, Swiss 

francs  (hereinafter  ‘Swiss  franc  loans’),  by  requiring  credit  institutions  established  in  Slovenia  to 

convert  Swiss  franc  loans  concluded  between  28  June  2004  and  31  December  2010  into  loans 

denominated in euro.  

1.2  The  draft  law  aims  to  place  borrowers  of  Swiss  franc  loans  in  the  same  position  that  they  would 

have been in had their loans been denominated in  euro from inception. To this end, the draft law 

sets out the following conversion mechanisms: 

(i) 

the principal amount of the Swiss franc loans will be converted into euro at the exchange 

rate  set  out  in  the  credit  agreement  applicable  on  the  date  the  Swiss  franc  loans  were 

drawn by  the borrowers. In case the  principal amount was paid out in  euro at the time of 

drawdown then, for the purposes of the conversion, the actual amount as paid out in euro 

is to be taken into account; 

(ii) 

the  agreed  interest  rate  will  be  converted  into  another  interest  rate,  comprising  the 

interbank interest rate  in  the  euro area at the  date on which  the loan  was drawn and  the 

same  margin  agreed  in  the  loan  agreement.  The  agreed  period  for  recalculations  of  the 

interest  rate  remains  unaltered.  According  to  the  explanatory  memorandum  on  the  draft 

law,  using  the  interbank  interest  rate  in  the  euro  area  in  the  conversion  mechanism 

1  

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). 

 
 
 
 
                                                 
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protects the legitimate business interests of credit institutions by enabling the usual interest 

rates for euro denominated loans to be taken into account; 

(iii) 

the lender is required to prepare a new loan repayment schedule calculated in accordance 

with  the  measures  set  out  above  and  using  the  same  methodology  as  for  the  original 

repayment schedule; 

(iv) 

the  instalments  that  have  already  been  paid  by  the  borrower  in  line  with  the  original 

repayment  schedule  will  be  converted  into  euro  at  the  exchange  rate  applicable  on  the 

date of payment of each instalment.  In case the instalments were repaid in euro then, for 

the purposes of the conversion, the actual amount of the instalments as repaid in euro is to 

be considered. Paid instalments will serve as the basis for settling the amounts due under 

the  new  loan  repayment  schedule,  whereby  the  same  order  for  settling  obligations  as 

under the original loan agreement is to be used; 

(v) 

the  creditor  shall  prepare  a  new  amortisation  plan  for  existing  credits  which  have  been 

repaid ahead of schedule, taking any overpayments into account; 

(vi) 

if the total amount of instalments already paid by the  borrower and  converted  in  euro (as 

described  in  point  (iv)  above)  is  higher  than  the  total  amount  of  converted  instalments 

calculated according to the new loan repayment schedule (referred to in point (iii) above), 

this  amount  will  be  considered  an  ‘overpayment’.  Depending  on  the  amount  of  this 

overpayment, it will be treated as follows: 

a. 

if  the  amount  of  the  overpayment  does  not  exceed  the  sum  of  converted  instalments 

that are still to be paid in line with the new repayment schedule, the overpayment will 

be  proportionally  distributed  for  the  settlement  of  future  outstanding  instalments,  and 

the loan agreement  will remain in force;  

b. 

if  the  amount  of  the  overpayment  exceeds  the  total  sum  of  a  converted  Swiss  franc 

loan that the borrower has to repay in line with the new repayment schedule, then the 

lender must return this overpayment to the borrower within 30 days from the date the 

borrower confirms the conversion proposal and the loan agreement will be terminated. 

1.3  The  conversion  of  Swiss  franc  loans  applies  to  loans  concluded  between  28  June  2004  and  31 

December  2010,  irrespective  of  the  current  credit  balance.  The  draft  law  requires  lenders  to 

prepare  new  repayment  schedules  and  sets  out  supplementary  conversion  rules. With  respect  to 

loans  that  were  acquired  by  new  creditors,  the  draft  law  provides  that  the  original  lenders  are 

required to pay the new creditors the difference calculated by comparing the original amount to the 

amount  a  borrower  would  owe  the  new  creditor  had  the  amount  transferred  been  calculated 

according to the new amortisation plan.  

1.4  The lender must prepare a new repayment schedule and recalculate the existing Swiss franc loans 

and  submit  these  to  the  borrower  along  with  the  conversion  proposal  within  30  days  of  the  entry 

into  force  of  the  draft  law.  The  borrower  must  confirm  or  reject  the  conversion  proposal  within 

30 days of its receipt. 

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1.5  The conversion procedures under the draft law are to be supervised by Banka Slovenije, which is 

also to  act as the competent minor offence authority  in case  of breaches  of the  provisions of the 

draft law.  

1.6  The draft law provides that the lender, although required to propose and perform the conversion of 

Swiss  franc  loans  for  the  borrower,  also  has  the  right  to  challenge  the  conversion  before  a  court 

within six months following the conversion. The creditor may challenge the conversion if the credit 

agreement or the documentation shows that certain criteria had been complied with at the time the 

relevant  credit  agreements  were  concluded.    A  creditor  may  challenge  the  conversion  if,  prior  to 

concluding  the  credit  agreement,  the  borrower  signed  all  of  the  following  documents:  (i)  a 

document  stating  a  contractual  condition  governing  the  repayment  of  the  obligation  in  a  foreign 

currency,  drawn  up  in  clear  and  understandable  language;  (ii)  a  document  stating  he  or  she  was 

informed of all elements that could affect the scope of his or her obligation; (iii) a document stating 

that he or she was given a warning on the possibility of exchange rate changes and of risks arising 

from  a  Swiss  franc  denominated  transaction;  (iv)  a  document  stating  that  he  or  she  was  shown 

calculations  on  the  economic  effects  of  possible  exchange  rate  fluctuations  on  his  or  her  total 

obligation  to  repay  under  the  agreement;  (v)  a  document  containing  an  example  of  an  actual 

foreign currency credit in the past period showing risks associated with foreign currency credit; and 

(vi) a document showing that the creditor offered the borrower insurance for currency risks or used 

an  upper  limit  risk,  thereby  preventing  significant  imbalance  in  the  rights  and  obligations  of  the 

parties.  Even  if  a  creditor  complies  with  the  above  criteria,  the  court  shall  also  assess  (i)  the 

existence of a significant imbalance between the parties when a conversion is contested, and (ii) if 

the creditor should have known the agreement creates a significant imbalance between the parties 

as a result of which the condition is unfair and thus unlawful. The explanatory memorandum to the 

draft law sets out criteria for informed consent in relation to point (ii), which are based on, inter alia, 
the  reasoning  in  a  judgement  of  the  Court  of  Justice  of  the  European  Union2  concerning  the 
interpretation of Council Directive 93/13/EEC3. 

1.7  Additionally, the draft law  addresses the issue  of conversion of  transferred  credits. Creditors  who 

have  transferred  their  loans  to  third  parties  are  required  to  pay  the  transferee  the  difference 

calculated by comparing the amount of the transferred credit to the amount a borrower would owe 

the transferee of the receivable had the amount transferred been calculated according to the new 

amortisation plan on the day the receivable was transferred. If the borrower’s debt to the transferee 

of  the  receivable  is  lower  than  that  calculated  difference,  the  creditor  shall  pay  the  borrower  the 

difference. 

1.8  According to the explanatory memorandum, the objective pursued by the draft law is to implement 

the  constitutional  principle  of  the  ‘welfare  state’  and  to  introduce  sanctions  for  breaches  of 

obligations arising under contractual relationships, thereby providing legal protection for consumers 

who  have  taken  out  Swiss  franc  loans.  The  explanatory  memorandum  questions  the  legality  of 

linking credit agreements to Swiss franc, in particular in a euro area country with a stable currency, 

where  loans  were  granted  mainly  in  euro.  The  explanatory  memorandum  argues  that  the  use  of 

2  
3  

Judgement of the Court of Justice of 20 September 2017, Andriciuc and Others, C-186/16, ECLI:EU:C:2017:703. 
Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts (OJ L 95, 21.4.1993, p. 29). 

3 

                                                 
currency clauses, the risk of which is predominantly borne by borrowers, is an unfair practice used 

by credit institutions, in particular combined with the lack of informed consent by the borrowers of 

ECB-PUBLIC 

Swiss franc loans.  

2. 

General observations  

2.1  The ECB issued an opinion on a similar Slovenian draft law [which was never enacted into law] in 

20184. 

2.2  Prior to the global financial crisis, borrowing in foreign currencies by households and non-financial 
corporations was popular in several Member States5. As previously noted by the ECB6, the lower 

interest  rates  applicable  to  foreign  currency  loans  compared  to  loans  in  the  domestic  currency 

increased the demand for such loans. According to the documentation included in the explanatory 

memorandum and the draft law, the majority of Swiss franc loans were and still are mortgage loans 

and were granted by foreign-owned credit institutions.  

2.2.1  The  ECB  notes  that  the  draft  law  anticipates  that  the  conversion  of  the  outstanding  and  already 

terminated Swiss franc loans to loans denominated in euro will be voluntary only for the borrowers. 

The ECB also notes that the draft law provides for the possibility for credit institutions to challenge 

the  conversion  after  it  has  been  implemented,  restoring  the  parties  to  the  position  they  were  in 

under the terms of the original Swiss franc loan, if they can prove in court that the borrower entered 

into the Swiss franc loan on the basis of informed consent, as defined in the draft law. 

2.3 

Legal aspects on retroactivity 

2.3.1  As  previously  noted  by  the  ECB,  introducing  measures  with  retroactive  effect  undermines  legal 
certainty and is not in line with the principle of legitimate expectations7, and may also interfere with 

acquired rights. 

2.3.2  Article  23(1)  of  Directive  2014/17/EU  of  the  European  Parliament  and  of  the  Council8,  which 
applies to credit agreements in existence from 21 March 20169, stipulates that Member States shall 

ensure  that  an  appropriate  regulatory  framework  is  in  place  for  credit  agreements  in  respect  of 

foreign  currency  loans  to  ensure,  at  a  minimum,  that (a)  the  consumer  has  a  right  to  convert  the 

credit  agreement  into  an  alternative  currency  under  specified  conditions  or  (b)  there  are  other 

arrangements in place to limit the exchange rate risk to which the consumer is exposed under the 

credit  agreement.  Article  23(5)  of  Directive  2014/17/EU  allows  Member  States  to  further  regulate 

foreign  currency  loans  provided  that  such  regulation  is  not  applied  with  retroactive  effect.  The 

retroactive  effect  of  the  draft  law  is  not  in  line  with  the  general  aim  of  Article  23(5)  of  Directive 

4 
5  

6  
7  
8  

9  

See Opinion CON/2018/21. All ECB opinions are published on the ECB’s website at www.ecb.europa.eu. 
For  further  information  on  lending  in  foreign  currencies  in  the  Union  see  the  Annex  to  Recommendation  of  the 
European  System  Risk  Board  (ESRB/2011/1)  of  21  September  2011  on  lending  in  foreign  currencies  (OJ  C  342, 
22.11.2011, p.1). 

See, for example, paragraph 2.1 of Opinion CON/2018/21.  
See, for example, paragraph 2.2 of Opinion CON/2018/21. 

Directive 2014/17/EU  of the European  Parliament  and of the Council of 4 February  2014  on credit agreements for 
consumers  relating  to  residential  immovable  property  and  amending  Directives  2008/48/EC  and  2013/36/EU  and 
Regulation (EU) No 1093/2010 (OJ L 60, 28.2.2014, p. 34). 

See Article 43(1) of the Directive 2014/17/EU. 

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2014/17/EU10,  which  reflects  one  of  the  general  principles  of  Union  law,  namely  the  principle  of 
legal certainty11 that supports the limitation of retroactive laws12. 

2.3.3  It is for the Slovenian authorities to assess whether the retroactive character of the draft law  also 

complies with Slovenian legal and constitutional principles13. 

3. 

Specific observations 

3.1  Eligibility criteria 

3.1.1  The draft law does not prescribe any specific criteria for borrowers to be eligible to participate in the 

conversion. For example, the draft law does not impose an upper limit to the amount of the credit 
extended which would limit the risk of moral hazard14.  

3.2  Effects on the banking sector 

3.2.1  The implementation of the draft law is expected to entail financial costs for  the Slovenian banking 

sector.  Credit  institutions  may  be  affected  to  different  degrees  to  the  extent  that  they  have 

concluded  Swiss  franc  loans  between  28  June  2004  and  31  December  2010.  This,  in  turn,  is 

expected to have a negative impact on the profitability, capitalisation and future lending capacity of 
the banking sector as a whole15. It is worth mentioning that determining the extent of such impact is 

difficult  since  the  draft  law  has  not  benefited  from  an  impact  assessment  conducted  by  the 

competent national authorities.   

3.2.2  It should also be noted that the  conversion  will  lead to a one-off increase in operational costs for 

the affected credit institutions in Slovenia, in particular due to the restructuring of existing hedges, 

refinancing measures, and the costs associated  with  the obligation to recalculate the  Swiss franc 
loans in order to notify each borrower individually thereof16.  

3.2.3  An  additional  concern  is  that  the  draft  law  puts  the  entire  burden  of  conversion  of  Swiss  franc 

denominated loans into euro denominated loans  on the originator credit institutions even if, in the 

interim,  originators  had  already  transferred  the  loans  (as  non-performing  loans,  ‘NPLs’)  to  third 

parties,  as  is  the  case  of  numerous  Slovenian  credit  institutions.  Such  provisions  in  the  draft  law 

represent an important impediment to the effective and resolution of NPLs as the  originator credit 

institutions  would  not  have  been  able  to  effectively  transfer  NPLs  off  their  balance  sheet.  The 

reasoning  behind  NPL  transfers  is  inter  alia  to  remove  uncertainty  with  regard  to  potential  future 

losses associated with the transferred assets.  

3.2.4  The  ECB  has  been  a  strong  proponent  of  the  development  of  secondary  markets  for  credit 

institution assets, particularly NPLs, as reflected in the EU Council’s action plan to tackle NPLs in 

10  
11 

12 

13  
14  
15  
16  

See the paragraphs of the Opinions referred to in footnote 7. 

See, for example,  judgement of the Court of Justice of the European Union of 10 March 2009,  Heinrich, C-345/06, 
ECLI:EU:C:2009:140. 

See,  for  example,  judgement  of  the  Court  of  Justice  of  the  European  Union  of  16  May  1979,  Tomadini,  C-84/78, 
ECLI:EU:C:1979:129. 

See paragraph 2.2.3 of Opinion CON/2018/21. 
See paragraph 3.1.1 of Opinion CON/2018/21. 
See paragraph 3.2.1 of Opinion CON/2018/21. 

See paragraph 3.2.2 of Opinion CON/2018/21. 

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Europe17,  as  the  ECB  has  previously  noted18.  As  part  of  a  comprehensive  solution  to  NPL 

resolution,  the  development  of  secondary  markets  may  contribute  to  reducing  NPLs.  Looking 

ahead,  well-functioning  secondary  markets  may  also  prevent  stocks  of  NPLs  building  up  in  the 

future.  Moreover,  a  well-functioning  secondary  market  may  have  a  positive  effect  on  financial 

stability  to  the  extent  that  it  could  facilitate  the  transfer  of  the  risks  of  NPLs  off  credit  institutions' 

balance sheets. The presence of significant volumes of NPLs on credit institutions' balance sheets 

reduces their ability to fulfil their function as providers of credit to the real economy and hampers 

the  operational  flexibility  and  overall  profitability  that  are  essential  to  a  well-functioning  banking 

sector. It is essential that the legal framework applicable to secondary markets enables the efficient 

transfer of NPLs off the balance sheet of credit institutions, an aspect with regard to which the draft 
law may introduce uncertainty19.  

3.2.5  As a consequence of the draft law, Slovenian credit institutions will incur new losses with regard to 

NPLs  already  removed  from  their  balance  sheets.  As  the  ECB  has  pointed  out  on  previous 
occasions20,  the  ability  of  financial  institutions  to  effectively  manage  credit  risk  depends  on  a 

reliable, predictable and stable legal framework that adequately balances the interests of both the 

creditor and the debtor. In this respect, it is important to carefully consider the impact of the draft 

law in order to ensure legal certainty, and to prevent moral hazard from arising in the relationship 

between creditor and debtor. If credit institutions are deprived of efficient tools to work out NPLs in 

an effective and timely manner, this could result in unnecessarily high levels of NPLs and private 

sector debt, which in turn have an adverse impact on financial stability and could undermine future 

credit supply. 

3.2.6  Additionally,  the  Slovenian  credit  institutions  that  transferred  their  NPL  portfolio  to  third  parties, 

have  also  handed  over  all  relevant  documentation  regarding  the  transferred  loans  to  the  new 

creditors  who  were  fully  aware  of  the  nature  of  the  loans  prior  to  that  transaction.  The  draft  law 

could  therefore  interfere  with  the  commercial  agreements  between  the  credit  institutions  and  the 

purchasers of loans and cause disproportionate operational costs for credit institutions.  

3.2.7  To  conclude,  the  draft  law  must  carefully  balance  the  benefits  of  creating  well-functioning 
secondary  markets  for  NPLs  against  the  impetus  to  protect  debtors21.  In  addition,  the  draft  law 

would benefit from a thorough impact assessment.  

3.3  Effects on the financial stability 

3.3.1  The ECB has pointed out on several occasions the risks associated with foreign currency loans 22. 

In  particular,  foreign  currency  loans  have  constituted  a  major  risk  to  financial  stability  in  several 

17        See the Council's press release of 11 July 2017 on the ‘Council conclusions on Action plan to tackle non-performing 

loans in Europe’, available on the Council's website at: http://www.consilium.europa.eu. 

18        See paragraph 1.1. of Opinion CON/2018/54. 
19 
See paragraph 2.2.1 and 2.2.2 of Opinion CON/2018/31. 
20        See, for example, paragraph 2.2.4 of the Opinion CON/2019/8. 
21        See paragraph 2.2.3 of the Opinion CON/2018/31. 
22  

See  in  particular  the  ECB  Financial  Stability  Review  of  June  2010  and,  in  respect  of  the  foreign  currency  loans  in 
Hungary, Opinions CON/2011/87, CON/2012/27, CON/2014/59, CON/2014/72 and CON/2014/76, and in respect of 
the foreign currency loans in Poland, Opinion CON/2015/26. 

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Member States, where the share of foreign currency loans is relatively high. The ECB points, in this 
respect, to the analysis of such risks made by the ESRB in Recommendation ESRB/2011/123.  

3.3.2  As  regards  the  long-term  effects  on  financial  stability,  when  introducing  measures  in  relation  to 

settling  and  converting  foreign  currency  loans,  due  consideration  should  always  be  given  to  fair 
burden  sharing  among  all  stakeholders  in  order  to  avoid  moral  hazard  in  the  future24.  The 

explanatory memorandum argues that  the  interests of credit institutions  are taken into account  in 

the  draft  law,  for  example,  in  the  conversion  process  higher  interest  rates  are  to  be  used  for  the 

preparation  of  the  new  repayment  schedules,  reflecting  common  practices  in  euro  denominated 

loans.  However,  the  draft  law  provides  for  the  replacement  of  the  previously  agreed  interest  rate 

with  the  interbank  interest  rate  in  the  euro  area  for  recalculation  purposes,  whereas  the  original 

loan-based  margin  remains  the  same,  which  appears  to  potentially  deviate  from  the  common 

practices  of  credit  institutions  which  typically  apply  a  higher  loan-based  margin  for  euro 

denominated loans than for Swiss franc denominated loans.  

3.3.3  As  the  ECB  has  noted  previously25,  given  that  Slovenia  only  joined  the  euro  area  in  2007,  the 

conversion  of  any  loans  from  Swiss  franc  into  euro  between  2004  and  2007  could  result  in  an 

unequal  treatment  of  other  customers,  depending  on  exchange  rate  developments  between  the 

Slovenian  tolar  and  Swiss  franc  during  this  period.  A  reconciliation  method  may  therefore  be 

needed to reflect exchange rate developments between the tolar, Swiss franc and euro during this 

period. 

3.4  Effects on the Slovenian economy 

3.4.1  As the ECB has noted previously26, the conversion of Swiss franc loans with retroactive effect, as 

envisaged by the draft law, could have negative effects if it were to lead to a deterioration of both 

foreign  and  domestic  investor  sentiment,  and  trust  in  the  system,  due  to  a  perceived  increase  in 

legal uncertainty and country risk.  

4. 

Conferral of new tasks on Banka Slovenije 

4.1  New task of Banka Slovenije 

4.1.1  The  draft  law  confers  the  task  of  supervising  the  conversion  procedures  in  relation  to  credit 

institutions  on  Banka Slovenije  and designates  Banka Slovenije  as  the competent minor  offence 

authority  in  case  of  a  breach  of  the  provisions  of  the  draft  law.  The  draft  law  does  not  specify  in 

detail the scope of this new task. The ECB understands that the Banka Slovenije’s supervisory task 

in  this  respect  would  essentially  require  Banka  Slovenije  to  supervise  the  compliance  of  credit 

institutions  with  the  requirements  of  the  draft  law  in  relation  to  the  restructuring  of  their  private 

contractual relationships with individual customers in the context of the conversion of  Swiss franc 

denominated  loans  into  euro  denominated  loans.  Banka  Slovenije  has  been  designated  as  the 

competent minor offence authority in relation to breaches of the draft law, within the scope of the 

23  
24  
25  
26  

However this does not seem to be the case in Slovenia. 
See, for example, paragraph 3.3.2 of Opinion CON/2018/21. 
See, for example, paragraph 3.3.3 of Opinion CON/2018/21. 

See, for example, paragraph 3.4.1 of Opinion CON/2018/21.  

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performance of its prudential supervisory tasks over credit institutions27, and also has, to a certain 
extent,  an  existing  customer  protection  role28.  However,  Banka  Slovenije  has  no  comparable 

responsibilities  in  respect  of  the  supervision  of  the  compliance  of  credit  institutions  with  the  legal 

requirements relating to the restructuring of privately negotiated loan contracts by credit institutions 

with their customers. The draft law therefore confers a new task upon Banka Slovenije. 

4.1.2  The ECB underlines that a proposed conferral of new tasks on a national central bank (NCB) in the 

European  System  of  Central  Banks  must  be  assessed  against  the  prohibition  on  monetary 

financing under Article 123 of the Treaty. For the purposes of that prohibition, Article 1(1)(b)(ii) of 
Council  Regulation  (EC)  No 3603/9329  defines  ‘other  type  of  credit  facility’,  inter  alia,  as  ‘any 

financing of the public sector’s obligations vis-à-vis third parties’. 

4.1.3  Ensuring that Member States implement a sound budgetary policy is one of the key objectives of 
the  monetary  financing  prohibition,  which  may  not  be  circumvented30.  Therefore,  the  task  of 

financing  measures,  which  are  normally  the  responsibility  of  the  Member  States,  and  which  are 

financed from their budgetary sources rather than by the NCBs, must not be entrusted to NCBs. To 

decide what constitutes financing of the public sector’s obligations vis-à-vis third parties, which can 

be translated as the provision of central bank financing outside the scope of central bank tasks, it is 

necessary  to  carry  out,  on  a  case-by-case  basis,  an  assessment  of  whether  the  task  to  be 

undertaken  by  an  NCB  is  a  central  bank  task  or  a  government  task,  i.e.  a  task  within  the 

responsibility  of  the  Member  States.  In  other  words,  adequate  safeguards  must  be  in  place  to 

ensure that circumventions of the objective of the monetary financing  prohibition of maintaining a 

sound budgetary policy of Member States do not take place. 

4.1.4  As part of its discretion in the exercise of its duty, on the basis of Article 271(d) of the Treaty and 

Article 35.6 of the Statute of the European System of Central Banks and of the  European Central 

Bank (hereinafter the ‘Statute of the ESCB’), to ensure that NCBs honour the obligations laid down 

by the Treaty, the Governing Council has endorsed safeguards of that kind in the form of criteria for 

determining what may be seen as falling within the scope of a public sector’s obligation within the 

meaning of Article 1(1)(b)(ii) of Regulation (EC) No 3603/93 or, in other words, what constitutes a 

government task as follows: 

First, central bank tasks are in particular those tasks that are  related to  the tasks that have been 

conferred upon the ECB and the NCBs by the Treaty and the Statute of the ESCB. These tasks are 

mainly  defined in  Article 127(2), (5) and (6) and Article 128(1) of the Treaty, as well as Article 22 

and Article 25.1 of the Statute of the ESCB. 

Second, as Article 14.4 of the Statute of the ESCB allows NCBs to perform ‘other functions’, new 

tasks, i.e. tasks that are not related to tasks that have been conferred upon the ECB and the NCBs, 

are  not  precluded  per  se.  However,  new  tasks  that  are  undertaken  by  an  NCB  and  which  are 

27   
28  
29  

30  

Article 380 of the Law of 2015 on banking.  
See Law of 2016 on consumer credit. 

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).   
Article  123  of  the  Treaty  also  serves  the  objective  of  maintaining  price  stability  and  reinforces  central  bank 
independence. 

8 

                                                 
ECB-PUBLIC 

atypical of NCB tasks or which are clearly discharged on behalf of, and in the exclusive interest of 

the government or of other public sector entities should be considered government tasks. 

Third, an important criterion for qualifying a new task as atypical of an NCB task or as being clearly 

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

entities  is  the  impact  of  the  task  on  the  institutional,  financial  and  personal  independence  of  that 

NCB. 

In particular, the following aspects should be taken into account: 

(a)   whether  the  performance  of  the  new  task  creates  conflicts  of  interest  with  existing  central 

bank tasks which are not adequately addressed and does not necessarily complement those 

existing  central  bank  tasks.  If  a  conflict  of  interest  arises  between  existing  and  new  tasks, 

sufficient  safeguards  to  mitigate  that  conflict  should  be  in  place.  The  complementarity 

between a new task and the existing central bank tasks should not be interpreted broadly, so 

as  to  lead  to  the  creation  of  an  indefinite  chain  of  ancillary  tasks.  Such  complementarity 

should be examined in relation to the financing of those tasks; 

(b)  whether without new financial resources the performance of the new task is disproportionate 

to  the  NCB’s  financial  or  organisational  capacity,  and  may  have  a  negative  impact  on  the 

capacity to perform properly the existing central bank tasks; 

(c)   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; 

(d)   whether the performance of the new task harbours substantial financial risks; 

(e)   whether the performance of the new task exposes the members of the NCB decision-making 

bodies  to  political  risks  which  are  disproportionate  and  may  also  have  an  impact  on  their 

personal  independence  and,  in  particular,  on  the  guarantee  of  term  of  office  set  out  in 

Article 14.2 of the Statute of the ESCB. 

4.1.5  On the basis of the criteria set out above, the following paragraphs assess whether the new task of 

Banka Slovenije is in line with the prohibition of monetary financing. 

4.2  Tasks related to the tasks conferred upon the ECB and the NCBs by the Treaty and the Statute of 

the ESCB  

4.2.1  As  previously  noted  by  the  ECB31,  supervising  the  compliance  of  credit  institutions  with  the 

requirements  of  the  draft  law  in  relation  to  the  restructuring  of  privately  negotiated  loan  contracts 

with their customers is not among the basic central banking tasks listed in Article 127(2) or (5) of 

the  Treaty  or  otherwise  conferred  upon  the  NCBs  by  the  Statute  of  the  ESCB.  The  new  task 

conferred  on  Banka  Slovenije  does  not  form  part  of  the  prudential  supervisory  tasks  of  Banka 

Slovenije.  Thus,  the  new  task  conferred  on  Banka  Slovenije  under  the  draft  law  is  not  directly 

related  to  the  tasks  conferred  on  the  ECB  and  the  NCBs  by  the  Treaty  and  the  Statute  of  the 

ESCB.  Consequently,  a  careful  assessment  of  the  conferral  of  this  task  on  Banka  Slovenije  is 

required  in  order  to  determine  whether  it  constitutes  a  government  task,  and  whether  the  related 

funding gives rise to monetary financing concerns.  

31  

See, for example, paragraph 4.2.1 of Opinion CON/2018/21. 

9 

                                                 
ECB-PUBLIC 

4.3  Tasks which are atypical of NCB tasks  

4.3.1  As  previously  noted  by  the  ECB32,  the  new  task  conferred  on  Banka  Slovenije  by  the  draft  law 

relates to the supervision  of  the compliance by credit institutions  with the requirements under the 

draft  law  relating  to  the  restructuring  of  privately  negotiated  loan  agreements  between  credit 

institutions  and  their  customers.  Banka  Slovenije’s  new  task  can  be  seen,  to  a  certain  extent,  as 

being related to the protection of consumers.  

4.3.2  As  previously  noted  by  the  ECB33,  it  is  necessary  to  analyse  whether  this  new  task  is  atypical  of 

NCB tasks. While the majority of NCBs do not appear to have been assigned tasks of this nature, 
the ECB has identified two Member States where NCBs have been given similar tasks. In Cyprus34 
and Hungary35, the NCBs have been given tasks  relating to the supervision of the compliance by 

credit institutions with  the legal requirements  in relation to the restructuring of private, contractual 

loan  agreements  between  credit  institutions  and  their  customers.  In  the  case  of  Hungary,  these 

tasks are substantially similar to the tasks to be conferred on Banka Slovenije under the draft law. 
In addition, the NCBs in Croatia36, the Czech Republic37, Ireland38, Italy39 and Slovakia40 have been 

given  similar  supervisory  tasks  relating  more  generally  to  consumer  protection  and  the 

transparency of loan arrangements. In this regard, also taking into account the consumer protection 
roles which are currently fulfilled by numerous ESCB NCBs in the field of financial services 41, the 

new task does not appear to be completely atypical of NCB tasks. However, the new task would be 

considered  as  atypical  if  Banka  Slovenije’s  supervisory  role  would  extend  to  the  resolution  of 
disputes between contractual parties, which is a matter that is usually handled by the courts42. 

4.4  Tasks clearly discharged on behalf of and in the exclusive interest of the government 

32  
33  
34  

See paragraph 4.3.1 of Opinion CON/2018/21. 

See paragraph 4.3.2 of Opinion CON/2018/21. 
The Central Bank of Cyprus was entrusted with sanctioning powers in relation to the compliance of credit institutions 
with restrictions regarding the  variation of the interest rates on  credit facilities imposed by Cypriot Law 160(I)/1999 
and  supervisory  tasks  relating  also  to  civil  law  aspects  in  the  area  of  payment  services  and  mortgage  credit.  In 
connection with the performance of these tasks the Central Bank of Cyprus may also request and review privately 
negotiated contracts between credit institutions and their customers.    

35   Magyar  Nemzeti  Bank  has  a  supervisory  role  in  connection  with  the  compliance  by  credit  institutions  with  legal 
requirements  relating  to  the  conversion  of  foreign  currency  denominated  consumer  loans,  including  loans 
denominated in Swiss francs, as defined in applicable laws (e.g. Law XXXVIII of 2014 and Law XL of 2014, both as 
amended by Law LXXVIII of 2014, Law XXVII of 2014, Law LII of 2015 (amending Law XL of 2014) and Law CXLV 
of  2015).  The  performance  of  these  supervisory  tasks  involves  the  verification  of  compliance  by  credit  institutions, 
which includes also the review of privately negotiated contracts between credit institutions and their customers. See 
Opinion CON/2014/72.  

36    Hrvatska narodna banka carries out oversight over credit institutions’ compliance with the Law on credit institutions, 
which  includes  compliance  with  internal  bylaws  of  credit  institutions  governing  the  relationship  with  their  clients, 
contracts concluded and consumer protection provisions. 

37  

38  
39  

40  

41  
42  

Česka Narodni Banka has been assigned tasks related to consumer protection, including supervision of compliance 
by  supervised  entities  of  the  observance  of  the  prohibition  of  unfair  business  practices  and  supervision  of  rules 
regarding consumer discrimination or the obligation to inform about prices.   
See, for example, paragraph 3.4.2 of Opinion CON/2017/12. 

Banca  d'Italia  has  been  assigned  with  tasks  in  relation  to  the  supervision,  from a  transparency  perspective,  of  the 
terms of banking and financial agreements between credit institutions and non-credit institution lenders. 

Narodna  Banka  Slovenska  has  powers  in  the  area  of  the  protection  of  financial  consumers,  which  include  a 
preliminary  assessment  of  unfair  commercial  practices  of  supervised  entities  and  unacceptable  conditions  in 
contracts  for  the  provision  of  financial  services.  The  scope  of  this  supervision  does  not  include  the  adjudication  of 
disputes between the supervised entities and their customers. 
See for example, paragraph 3.4.2 of Opinion CON/2017/12. 

See paragraph 4.3.2 of Opinion CON/2018/21. 

10 

                                                 
ECB-PUBLIC 

4.4.1  According  to  the  explanatory  memorandum,  the  objective  of  the  draft  law  is  to  implement  the 

constitutional principle of the ‘welfare state’ and to introduce sanctions for breaches of obligations 

arising  under  contractual  relationships,  thereby  providing  legal  protection  to  a  number  of 

consumers  who  have  taken  out  Swiss  franc  loans.  The  draft  law  is  therefore  intended  to  provide 
protection to consumers of financial services. As previously noted by the ECB43, the NCB ‘is best 

placed  to  assess  the  terms  and  conditions  of  loan  contracts  entered  into  by  consumers  and  the 

impact of the new legal measures on financial institutions. Within the scope of its tasks, the [NCB] 

can  contribute  to  the  prevention  and  mitigation  of  systemic  risks  to  financial  stability’.  Due  to  the 

retroactive  application  of  the  draft  law,  it  is  not  clear  whether  the  draft  law  would  effectively 

guarantee the fulfilment of the objective of protecting consumers of financial services. Thus, there 

is  a  potential  risk  that,  in  carrying  out  its  supervisory  functions,  Banka  Slovenije  would  act 

exclusively in the interest of another public entity. 

4.5  Extent to which performance of the new task creates conflicts of interest with existing central bank 

tasks 

4.5.1  As  previously  noted  by  the  ECB44,  it  may  be  considered  that  the  new  task  at  least  partially 

complements other similar existing supervisory and consumer protection tasks of Banka Slovenije. 

As  with  other  consumer  protection  tasks,  sufficient  mitigation  measures  must  be  put  in  place  to 

ensure that in the event of a conflict of interest supervisory considerations prevail.  

4.6  Extent  to  which  performance  of  the  new  task  is  disproportionate  to  the  financial  or  organisational 

capacity of Banka Slovenije 

4.6.1  As  previously  noted  by  the  ECB45,  the  principle  of  financial  independence  requires  that  Member 

States may not put their NCBs in a position where they have insufficient resources to carry out both 

their  ESCB-related  tasks  and  their  national  tasks,  from  an  operational  and  financial  perspective. 

Furthermore,  when  allocating  specific  new  tasks  to  NCBs,  each  NCB  concerned  should  have 

sufficient financial and human resources at its disposal to ensure that the tasks can be carried out 

without impacting on the NCB’s financial or operational capacity to perform its ESCB tasks. In order 

to ensure that Banka Slovenije’s capacity to perform its ESCB-related tasks is not impaired, Banka 

Slovenije must, therefore, be in a position to avail itself of the necessary resources to carry out its 

duties  under  the  draft  law.  At  this  early  stage,  it  is  difficult  to  predict  what  additional  resources 

Banka  Slovenije  will  require  in  order  to  perform  its  new  supervisory  task  under  the  draft  law. 

However,  it  is  likely  that  Banka  Slovenije  will  have  to  dedicate  additional  human,  technical  and 

financial resources to implement this new supervisory task. This may impose an additional burden 

on existing central banking and supervisory tasks performed by Banka Slovenije. While supervised 

entities are required to pay fees to Banka Slovenije in respect of the performance of its supervisory 
tasks under the Law on consumer credit46, the draft law does not provide for Banka Slovenije to be 

reimbursed for the costs of carrying out this new task. The ECB invites the consulting authority to 

consider the impact of the draft law on the resources of Banka Slovenije. 

43  
44  
45  
46   

See, for example, paragraph 4.4.1 of Opinion CON/2018/21. 
See, for example, paragraph 4.5.1 of Opinion CON/2018/21. 
See, for example, paragraph 4.6.1 of Opinion CON/2018/21. 

See Article 79 of the Law on consumer credit (Zakon o potrošniških kreditih).  

11 

                                                 
ECB-PUBLIC 

4.7  Extent to which performance of the new task fits into the institutional set-up of Banka Slovenije, in 

the light of central bank independence and accountability considerations 

4.7.1  The  potential  impact  of  the  new  task  on  the  institutional,  financial  and  personal  independence  of 

Banka Slovenije must also be taken into consideration. 

4.8  Extent to which the performance of tasks harbours substantial financial risks  

4.8.1  The  draft  law  does  not  contain  any  specific  provisions  on  liability  in  relation  to  the  exercise  of 

Banka  Slovenije’s  powers  under  the  draft  law  or  the  failure  to  exercise  such  powers.  Banka 

Slovenije’s potential liability in respect of the performance of the new task will thus be subject to the 

rules  on  liability  for  damages  caused  in  the  exercise  of  public  authority  pursuant  to  the  Law  on 
banking and the general liability regime under Slovenian law. As previously noted by the ECB47, the 

general liability regime would also apply with respect to any potential damages in connection with 

decisions of Banka Slovenije delivered in supervisory proceedings  pursuant to the draft law which 

are later declared to be invalid in the courts. 

4.9  Extent to which the performance of the new task exposes members of the decision-making bodies 

of Banka Slovenije to disproportionate political risks and impacts on their personal independence  

4.9.1  As previously noted by the ECB48, due to the sensitivity of the subject matter and the high degree 

of  public  attention  being  given  to  the  restructuring  of  Swiss  franc  loans  in  Slovenia,  due 

consideration  should  be  given  to  any  disproportionate  political  risk  or  impact  on  the  personal 

independence of the members of the decision-making bodies of Banka Slovenije that may arise in 

the performance of the new task. In this respect, consideration might be given to the possibility of 

conferring  this  task  on  a  separate  government  agency  to  which  Banka  Slovenije  could  provide 

technical  support  in  view  of  its  expertise  and  experience  in  dealing  with  the  Slovenian  banking 

sector. 

4.10  Conclusion 

4.10.1 As previously noted by the ECB49, the following should be noted as regards the compatibility of the 

draft  law  with  the  prohibition  on  monetary  financing.  The  new  task  of  Banka  Slovenije  of 

supervising the compliance of credit institutions with the requirements under the draft law in relation 

to  the  restructuring  of  privately  negotiated  loan  agreements  between  credit  institutions  and  their 

customers  can  be  regarded  as  a  central  bank  task.  However,  as  the  new  task  conferred  upon 

Banka  Slovenije  by  the  draft  law  must  not  adversely  affect  its  capacity  to  carry  out  its  NCB  or 

ESCB-related  tasks,  careful  consideration  should  be  given  to  its  impact  on  Banka  Slovenije’s 

operational  capacity.  In  addition,  careful  consideration  should  be  made  of  any  disproportionate 

political  risk  or  impact  on  the  personal  independence  of  the  members  of  the  decision-making 

bodies of Banka Slovenije that may arise in the performance of the new task.  

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

47  
48  
49  

See paragraph 4.8.1 of Opinion CON/2018/21. 
See paragraph 4.9.1 of Opinion CON/2018/21. 

See paragraph 4.10.1 of Opinion CON/2018/21. 

12 

 
 
                                                 
Done at Frankfurt am Main, 18 July 2019. 

[signed] 

The President of the ECB 

Mario DRAGHI 

ECB-PUBLIC 

13