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The Commission said the restructuring plan was in line with EU state aid rules and would enable Abanka to become "viable in the long term without continued state support".

The Finance Ministry said this would allow the government to complete the bank resolution measures started in December 2013. The bank will receive a further EUR 243m in fresh capital and EUR 446m-worth of non-performing claims will be transferred to the bad bank.

According to the restructuring plan proposed by Slovenia, Abanka will limit the scope of its activities to its core business, and improve its corporate governance and risk management policy.

Moreover, Slovenia committed to merge Abanka with Banka Celje and submit a restructuring plan for the joint entity by the end of 2014.

Commission vice president in charge of competition policy Joaquin Almunia said that Abanka's restructuring plan was "designed to ensure that the bank becomes viable again...Today's decision will further strengthen the confidence in the Slovenian banking system."

Aside from backing the plan, the Commission gave a nod to the government's decision to wipe out shareholders and subordinated bondholders, a measure that is being challenged in Slovenian courts.

The Commission said the step had ensured that "the bank and its stakeholders adequately contribute to the cost of restructuring."

The approval comes after the Commission provisionally authorised in December a first state recapitalisation of EUR 348m following bank stress tests that led to the bailout and renationalisation of the top three banks.

Abanka ended 2013 with a group net loss of EUR 306.5m, but the figures for this year are better, as it posted a net profit of half a million euros for the first half of the year.