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Slovenian state, central bank hold each other liable for banking sector damages

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Slovenian state, central bank hold each other liable for banking sector damages

The Slovenian central bank's head of legal said the bank could not compensate former investors in troubled Slovenian banks who suffered financial losses in the 2013 banking sector rescue in Slovenia, as it would be against EU legislation on state aid, Reuters reported March 4.

In a bid to avoid a collapse of the local banking system, which was weighed down by bad loans, Slovenia injected over €3 billion into mostly state-owned banks.

In the process, the Slovenian state, in coordination with the central bank, the European Commission and the European Central Bank, scrapped 600 million of subordinated bonds issued by the troubled banks, in addition to bank shares, leading to a legal battle, though no ruling has been finalized yet, the news agency added.

In 2016, Slovenia's constitutional court ruled that the country's banking act through which it canceled shares and scrapped bonds of troubled banks was partially unconstitutional. Many former investors are now bringing legal cases to reclaim their money, and the finance ministry has proposed that the central bank should pay damages.

However, the Slovenian central bank's head of legal, Jurij Zitko, said it would be against EU and Slovenian legislation for the central bank to pay damages.