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Amendments to banking regulation

In order to meet the transposition deadline of March 21 2009 and to bring into force the laws implementing Directives 2007/44/EC and 2007/64/EC amending Directive 2006/48/EC on the taking up and pursuit of the business of credit institutions, several amendments to the Banking Act have been adopted and entered into force on March 28 2009.

Accordingly, the new provisions introduce the following: (i) an approval for the acquisition of a qualified holding in the bank to be conferred in range; (ii) new criteria for the assessment of the suitability of a qualified holder; (iii) proceedings for conferring an approval for the acquisition of a qualified holding; and (iv) rules on the collection and exchange of information regarding credit ratings of private persons among financial institutions.

However, the most significant changes relate to the provisions enabling the Bank of Slovenia (BSI) to enforce a share capital increase of a bank in order to ensure its economic stability (liquidity and capital adequacy).

Enforcement of a share capital increase

In addition to the implementation of the foregoing directives, amendments to the Banking Act give BSI a new measure of supervision: in order to ensure the economic stability of a bank (for example due to insufficient liquidity or capital adequacy of a bank), BSI is entitled to call a shareholders' meeting where it requires shareholders to increase the share capital by providing cash contributions in an aggregate amount determined by BSI.

If shareholders do not comply with BSI's request and do not increase the share capital by providing a cash contribution, BSI is entitled to enforce an increase of share capital through a conversion of creditors' receivables to the share capital of a bank. In fact, upon creditors' expressed consent, BSI is entitled to enforce a share capital increase with an in-kind contribution against receivables of the bank's creditors by issuing either common or preferred stock.

This new instrument actually makes operational provisions under the financial stabilisation scheme that were adopted to support financial institutions. With the adoption of this mechanism through BSI, the government has created a tool that exercises a conversion right that can be exercised in case of defaulted state loans or realised state guarantees.

Approvals for the acquisition of qualified holding

Under this new law BSI gives the approval for qualified holdings in specified ranges and not for a specified holding. Moreover, it provides several new criteria for BSI to apply when assessing an application for approval to acquire a qualified holding, such as the reputation of the proposed acquirer and its financial soundness.

Existing approvals remain valid, but will have to be modified from approvals for the specified qualified holding to approvals for holdings in a certain range. Accordingly, a qualified holder that holds an approval for a 34% qualified share will now receive an approval to hold up to 50% of shares in the target bank.

Collection, exchange and processing of Information on credit ratings of private persons

This new amendment also provides new rules on the collection, exchange and processing of the credit ratings of private persons among the banks and other financial institutions. In addition, it includes institutions whose single or main activity is conducting leasing activities.

Matija Repolusk

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