The Slovenia Times

FinMin Expects no Problem in Transposition of Bail-In Rules

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Under changes to the banking act that the government adopted on Thursday, the bail-in would affect shareholders, holders of subordinated bonds and hybrid debt instruments, and any other financial instruments lower down the line of seniority.

Bail-in would be an extraordinary measure in the event of heightened risk that a bank did not meet minimum capital requirements or could run afoul of such requirements within six months, and if it met insolvency criteria. The conditions and the extent of the bail-in would be determined by the central bank.

The proposal is in line with the EU-wide banking rules that stepped into force on 1 August with a view to reduce the public cost of bank restructuring. But the motion provoked a strong reaction from small shareholders, the holders of subordinated and hybrid bonds.

An association representing small shareholders, the Small Shareholders of Slovenia, announced on Friday it would use "all legal means" to prevent what it said was retroactive curtailing of the rights of holders of subordinated debt. This could also mean a petition for revision of the bill by the Constitutional Court.

But Minister Čufer was confident on Tuesday that the bill would be implemented as proposed. The issue of subordinated debt was sorted out with the European Commission's rules; "So this debate is out of the question," Čufer said coming out of a meeting of EU finance ministers in Luxembourg.

Even in the case of a constitutional review, the minister does not expect any difficulties. "I believe this is now the standard in Europe and I believe that there should be no problem here," he said.

Eurogroup President Jeroen Dijsselbloem said that many member states still did not have appropriate legislation, and expressed the expectation that Slovenia would deal with the matter soon. The Netherlands and Germany have already implemented the bail-in rules.

Čufer would not yet speculate about how much could be raised by applying the bail-in mechanism in the restructuring of Slovenian banks.

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