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In December 2013 the subordinated bondholders in five Slovenian banks (NLB, NKBM, Abanka, Probanka and Factor Banka) were bailed-in to refinance these struggling institutions. Subordinated bonds in a sixth bank (Banka Celje) were wiped out in December 2014.
In each case the bail-in consisted of a complete wipe-out of all subordinated bonds, including those sold to retail investors at the counters of said banks. Individual investors received no compensation and had no legal means to challenge the bail-in decisions.
Finally, at the request of Better Finance's Slovenian Member Organisation VZMD, on 27 October, the Constitutional Court of the Republic of Slovenia completed its constitutional review of legal regulations that are at the basis of the expropriation of subordinated bondholders and shareholders. The Constitutional Court deemed that several articles of the Banking Act to be unconstitutional, as these deprived expropriated investors from access to effective judicial protection, a situation it has ordered to be addressed by a legal regulation to ensure efficient judicial protection of expropriated persons, to be adopted by the National Assembly of the Republic of Slovenia.
The PanSlovenian Investors' and Shareholders' Association (VZMD) filed a request for a constitutional review on behalf of 158 people who were expropriated as part of the Slovenian bank bail-in.
VZMD President, Mr Kristjan Verbič, commented on the Constitutional Court's decision: "VZMD understands that the Constitutional Court focused on a constitutional review of the relevant regulations only and did not deliberate on the Bank of Slovenia and whether its actions violated the investors' rights to efficient judicial protection."
Better Finance also welcomes this latest development but continues to stress that banking resolutions that don’t respect the rights of individual investors and depositors carry significant social costs. Since the onset of the financial crisis, individual savers and investors have borne the brunt of these costs. Not only are they paying for bailouts in their capacity as taxpayers, they are also suffering losses due to financial repression and negative returns on bank savings. At the very least, assurance should be given that the bail-in of retail investors and depositors is a measure of last resort.
