Prior to the second reading, the Bank of Slovenia once again brings attention to the disputed provisions of the draft Act on Judicial Relief Granted to Holders of Qualified Bank Credit
The second reading of the draft Act on Judicial Relief Granted to Holders of Qualified Bank Credit will take place at today’s session of the National Assembly’s Committee on Finance. Via the National Assembly’s website, the Bank of Slovenia familiarised itself with the amendments that were submitted by the parties of the governing coalition during the procedure, and finds that they do not address all of the questionable solutions of the draft act, particularly the financing of potential damages. Moreover, certain questionable provisions of the draft act put the Bank of Slovenia in a substantially weaker position, which is unprecedented in Slovenia and the EU in terms of public institutions.
In the context of today’s second reading of the draft act, the Bank of Slovenia repeats that the aforementioned draft act is problematic primarily in terms of the prohibition of monetary financing and the financial independence of the central bank. It is still envisaged in the draft act that the Bank of Slovenia will solely be responsible for the financing of potential imputed compensation. As we have already highlighted several times, such arrangements are unacceptable, as they are in contravention of EU law and the Slovenian Constitution, and pose a potential threat to the normal performance of the tasks of the Bank of Slovenia as a central bank.
The latest version of the law (taking into account amendments) puts the Bank of Slovenia in a substantially weaker position, which is unprecedented in Slovenia and the EU, as the proposed solutions are unique in terms of public institutions. With regard to monetary financing, the latest version of the law (taking into account amendments) stipulates that the Bank of Slovenia’s liability is potentially objective, while it is subjected to the reversed burden of proof. In terms of the liability of public institutions, such strict liability is exceptional both in Slovenia and in the EU. Here it should be emphasised that the Bank of Slovenia was not the only public institution that adopted decisions in the bank recovery and resolution process in 2013.
The justification of concerns expressed by the Bank of Slovenia is also confirmed in the opinions of the European Central Bank, which emphasises that Member States may not put their central banks in a position in which they have insufficient financial resources to perform their tasks, particularly those linked to the Eurosystem. The central bank must have sufficient capacity for the autonomous creation of the necessary reserves and provisions for financial risks that derive from potential financial instability, as a lender of last resort and as the bearer of measures for financial stability.
The Legislation and Legal Service of the National Assembly also expressed its concerns several times in its opinion regarding the draft act.
The proposed arrangements, which prevent the Bank of Slovenia from autonomously allocating the surplus of revenue over expenditure and also encroach upon existing general reserves, are thus unacceptable.
Bank of Slovenia’s call to the competent institutions
The Bank of Slovenia finds that the draft act envisages conditions for the simplest possible repayment of holders of subordinated debt, while at the same time introducing the strict liability of a public institution.
The Bank of Slovenia therefore emphasises that the act must be adopted as soon as possible, but without solutions that could cause further disputes, as this would further prolong and postpone judicial relief with respect to the deletion of subordinated liabilities in 2013. Insistence on arrangements that are not in line with EU law and existing Slovenian law could mean that the act will be subject to further review by the competent courts, which will further delay the resolution of the disputes of former holders of qualified liabilities. The Bank of Slovenia therefore calls again on the competent institutions to resolve such issues before the act enters into force.
Additional details regarding the Bank of Slovenia’s comments can be found in previous observations:
Bank of Slovenia’s position on the draft Act on Judicial Relief Granted to Holders of Qualified Bank Credit.
Also available is an expert article that analyses the position of financial buffers at central banks, and finds that the Bank of Slovenia falls in the median of Eurosystem central banks in terms of financial buffers as a proportion of total assets.
Also provided are links to the opinion of the European Central Bank on judicial relief granted to former holders of qualified bank credit (28 May 2019) and to the letter from the European Central Bank to the President of the National Assembly of the Republic of Slovenia (16 August 2019).