Case study Slovenia banking crisis

Slovenian banks were exposed to substantial corporate borrowings and wholesale financing. The global financial crisis made capital acquisition difficult and limited the funding possibilities. Simultaneously, the economy slowed down and the corporate non-performing loan portfolios at domestic banks grew. Several banks in Slovenia could not pass the new regulatory capital requirements, failed the asset quality review and stress test, and had to be recapitalized or resolved. The Bank Asset Management Company, BAMC, was incorporated by the Republic of Slovenia to facilitate the restructuring of systemic financial institutions. Distressed assets of systemic banks were transferred to the BAMC.

The resolution strategy was taken to the Slovenian Constitutional Court by subordinated creditors who had to write-off their subordinated claims, on the grounds of interference with private property rights. The Constitutional Court requested assistance and a preliminary ruling from the Court of Justice of the European Union. The European Court approved the right to enforce burden sharing on private investors, as this did not infringe the fundamental right to property.