EU Court of Justice backs 2013 bail-in of Slovenian banks

By Ivana Jovanovic in Belgrade July 19, 2016

The Court of Justice of the European Union said on July 19 that the 2013 bail-in of five Slovenian banks was valid and not contrary to EU law, according to the verdict issued at the request of the Slovenian Constitutional Court, which has admitted several applications filed by subordinated bondholders. Thus, based on the latest the court decision, estimated losses of €600m suffered by subordinated bondholders were also legal.

Back in 2013, Ljubljana stepped in to recapitalise several major banks, narrowly avoiding an international bailout. On December 18, 2013, the European Commission approved the restructuring plans for five banks - Nova Ljubljanska Banka (NLB), Nova Kreditna Banka Maribor (NKBM), Abanka Vipa, Probanka and Factor banka. A year later, the EC also approved aid to Banka Celje based on its restructuring plan and its merger with Abanka Vipa. The banks received capital from the government amounting to €3.6bn in 2013 and 2014.

Stabilising the banking sector has been an integral part of the Slovenian government's strategy for the restructuring of the financial sector since late 2013, when the country was hit by the eurozone crisis, following the global recession.

The EU Court said on July 19 that the measures at issue, which were adopted on the basis of the law on the banking sector, included writing off not only equity capital, but also subordinated debt.

The court said it also observes that an EU directive provides, in essence, that any increase or reduction in the capital of a public limited liability company must be subject to a decision by the general meeting of the company. The Slovenian government had cited an EU Banking Communication in support of its decision to wipe out subordinated debt.

“The Court considers that, to the extent that the Banking Communication provides that certain alterations to the share capital of banks do not have to be decided upon or approved by the general meeting, the Banking Communication is not incompatible with that directive," the Court press release reads.

"While the member states may possibly find it necessary, in a particular situation, to adopt such burden-sharing measures without the agreement of the general meeting of the company, that circumstance cannot however call into question the validity of the Banking Communication. Those measures can be adopted only in the context of there being a serious disturbance of the economy of a member state and with the objective of preventing a systemic risk and ensuring the stability of the financial system."

Local media in Slovenia reported that the EU Court had cleared the 2013 bail-in of subordinated bank bonds, deciding that the "burden sharing" was not in violation of EU law.

However, the Pan-Slovenian Shareholders’ Association (VZMD), which has been fighting to restore the rights of shareholders since 2013, sees the court decision as its victory and said that it has become clear that legal wrangles caused by the law should be resolved within the Slovenian judicial system.

“This applies all the more as the most controversial solutions of the law (ZBan-1L) and the specific calculations used by the Bank of Slovenia for emergency measures did not have any substantive basis in the European Commission’s Communication whatsoever (such as retroactivity, deprivation of legal remedies, non-compliance with the International Financial Reporting Standards etc.),” VZMD said in a press release issued on July 19.

The association said its president, Kristjan Verbic, was present for the pronouncement of the judgment in Luxembourg, and that he had already reacted to “some false reports which try to show the significant decision of the European Court of Justice in a different light”.

Related Articles

Italian Palladio Holding Group buys Cimos in €110mn deal

The shareholders of Slovenian automotive components manufacturer Cimos Group signed a deal on October 14 to sell the company to TCH Cogeme, a subsidiary of the Italian Palladio Holding Group. The ... more

Slovenian police end 323 day strike

The Slovenian police ended a 323 day strike on October 5 after the government agreed to their conditions and raised their wages. Slovenian police led by the Police Trade Union of ... more

Slovenian talks with EC officials hint at attempt to extend deadline for NLB privatisation

Slovenia’s interim Finance Minister Alenka Smerkolj discussed the privatisation of Nova Ljubljanska Banka (NLB) with European Competition Commissioner Margrethe Vestager during a recent visit ... more

Register here to continue reading this article and 2 more for free or 12 months full access inc. Magazine and Weekly Newspaper for just $119/year.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

IntelliNews Pro subscribers click here

Thank you. Please complete your registration by confirming your email address. A confirmation email has been sent to the email address you provided.

Thank you for purchasing a bne IntelliNews subscription. We look forward to serving you as one of our paid subscribers. An email confirmation will be sent to the email address you have provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

If you have any questions please contact us at

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

IntelliNews Pro subscribers click here

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

Thank you. Please complete your registration by confirming your email address. The confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.