LJUBLJANA (Reuters) - The Slovenian parliament on Tuesday passed legislation on bank bail-in repayments under which the Bank of Slovenia would have to cover all possible repayments to those who lost their investments during the country’s 2013 overhaul of the banking industry.
The Slovenian central bank, which is backed by the European Central Bank, said last week it will challenge the law at the Constitutional Court, which could prevent or significantly delay its enforcement.
The Bank of Slovenia and the ECB claim that making the central bank liable for any damages arising from court cases related to the bank rescue breaches European Union’s monetary financing rules.
The law, passed by a 46-34 margin, was prepared by the finance ministry which says the legislation is in line with a 2016 Constitutional Court ruling that urged the parliament to give greater legal protection to investors who lost assets during the 2013 bank rescue.
In 2013 the government poured more than 3 billion euros ($3.34 billion) into mostly state-owned local banks to prevent them from collapsing under a large amount of bad loans. This allowed Slovenia to avoid an international bailout.
A bail-in refers to a process in which a bank uses the money of its subordinated bondholders to restructure the capital to stay afloat.
During Slovenia’s bail-in process, which was led by the Bank of Slovenia in coordination with the government, the European Commission and the ECB, some 600 million euros of subordinated bonds issued by the troubled banks were scrapped as well as bank shares held by some 100,000 shareholders.
The rescued banks were later privatized.
Reporting by Marja Novak in Ljubljana; Editing by Matthew Lewis