Slovenia’s parliament passed a law requiring the central bank to compensate “bailed-in” bondholders and shareholders, despite the central bank warning that it was illegal.
The Bank of Slovenia warned on October 16 that if passed, the law “envisages actions for the Bank of Slovenia that would contravene current Slovenian legislation and international law”. But lawmakers nonetheless voted for the measure by 46 to 34.
All efforts to pass similar laws have failed in the past, with the European Central Bank playing an important role in blocking them.
It is unclear why the ECB has not yet issued a legal opinion on the matter, but it is possible EU authorities want to have the legality of the new law tested in the European Court of Justice. Previously, the ECJ has ruled that the central bank acted entirely lawfully by bailing-in the bondholders and shareholders.
The Bank of Slovenia did not immediately respond to a request for comment. Slovenian central bank governor Boštjan Vasle has yet to comment publicly on the new law, but has strongly opposed previous attempts to pass similar laws.
This is the latest move in a series of efforts by Slovene politicians to refund bondholders and shareholders of two large commercial banks at the central bank’s expense. The banks were bailed in in 2012 and 2013. Bondholders and shareholders then began a well-organised lobbying effort to demand compensation from the central bank.
The law was drafted by the Slovenian finance ministry. Mateja Vraničar Erman has been the country’s finance minister since September 2016. The previous finance minister resigned in July 2016 in protest at a police raid on the office of the then central bank governor in connection with the bail-in.
A majority of Slovene lawmakers have supported the bondholders’ campaign under successive governments.
The central bank said on October 16 that the law “stipulates that the Bank of Slovenia’s liability is potentially objective, while it is subject to a reversed burden of proof”. The ECB has said in official opinions that similar measures in past draft laws would have made them illegal under EU legislation.
The central bank told a locally-based reporter for Reuters that it would appeal against the law in Slovenian and European courts.
Some of those bailed in have also placed the central bank under severe pressure. The central bank’s previous governor, Bostjan Jazbec, said he resigned as a result of harassment stemming from the bail-in, including death threats and a police search of his office.
European Central Bank president Mario Draghi officially complained about the police raid on Jazbec’s office and the seizure of computers containing confidential eurozone information. The ECB said it did not receive a satisfactory reply from the Slovene authorities, and a local court rejected its lawsuit against the government’s actions. The European Commission is now taking legal action against the Slovene government over the raid on the central bank.