March 10, 2020 / 3:14 PM / 25 days ago

Slovenia's top court holds up bank rescue compensation law

LJUBLJANA, March 10 (Reuters) - Slovenia’s Constitutional Court on Tuesday held up the enforcement of a law on compensation to investors who lost their money in the 2013 rescue of Slovenian banks, heeding a demand from the Bank of Slovenia.

The law was passed in November but in January the central bank asked the court to rule on whether it was in line with the constitution, arguing the law breaks Slovenian and European rules on monetary financing by obliging the central bank to cover investors’ losses.

The court said the enforcement of the law will be held up until the court reaches its final ruling which is expected in the coming months.

The Bank of Slovenia, which is part of the European Central Bank (ECB) as a member of the euro currency, welcomed the decision.

“The law is problematic mainly from the view of monetary financing and financial independence of the central bank,” it said.

In 2013 the government poured more than 3 billion euros ($3.41 billion) into mostly state-owned local banks to keep them from collapsing under a large amount of bad loans.

The effort, led by the Bank of Slovenia in cooperation with the government, the European Commission and the ECB, enabled Slovenia to avoid the need for an international bailout.

But about 600 million euros of subordinated bonds issued by the rescued banks were scrapped, as well as bank shares held by some 100,000 investors, many of whom are now suing the banks and the central bank to get their money back.

The rescued banks were later privatised.

$1 = 0.8806 euros Reporting by Marja Novak, editing by Ed Osmond

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