Act on Judicial Relief Granted to Holders of Qualified Bank Credit: Court of Justice of the EU judgment

The Court of Justice of the EU today issued its judgment regarding the Act on Judicial Relief Granted to Holders of Qualified Bank Credit. Banka Slovenije finds that the judgment supports our opinion that the act is contestable from the view of monetary financing and the financial independence of the central bank. Here we add that a new legal solution is required that will comprehensively regulate this field and will comply with EU law and the constitution of the Republic of Slovenia.

Banka Slovenije lodged an application two years ago to assess the constitutionality of the Act on Judicial Relief Granted to Holders of Qualified Bank Credit (Act). Before ruling on the matter, the Constitutional Court of the Republic of Slovenia posed questions to the Court of Justice of the EU regarding which a ruling was rendered today.

In its ruling, the CJEU highlighted three important findings: that (i) Banka Slovenije could be liable for the damage suffered by holders of financial instruments only if it is proven that Banka Slovenije seriously breached its duty to act with due diligence (when fulfilling additional requirements that the cancellation/write-down was not required to ensure financial stability or that the write-down breached the principle of ‘no creditor worse off’); (ii) Banka Slovenije cannot cover the damage suffered by holders of financial instruments merely due to their modest income and waiver of other legal remedies, as provided by the Act; and (iii) Banka Slovenije cannot excessively spend its reserves for that purpose, as stipulated by the Act. 

Here Banka Slovenije explains that today’s judgment supports our past positions, i.e. that the Act is contestable in terms of monetary financing and the financial independence of the central bank. We also add that a legal solution is required that will comprehensively regulate this field and will comply with EU law and the constitution of the Republic of Slovenia.

In order to find a suitable solution as quick as possible, Banka Slovenije hired an independent team of legal experts. This team has already prepared proposed legal solutions for unresolved issues after bank recovery in 2013, and will soon also prepare a proposal of legal solutions that will be made available to competent authorities to be used by them at their own discretion in legislative and other proceedings.