This country-specific Q&A provides an overview of Banking & Finance laws and regulations applicable in Slovenia.
What are the national authorities for banking regulation, supervision and resolution in your jurisdiction?
In Slovenian jurisdiction the competent national authorities for banking regulation are the National Assembly, the Bank of Slovenia and the Ministry of Finance. Bank of Slovenia is also responsible for supervision and resolution.
Which type of activities trigger the requirement of a banking licence?
Banking license is obligatory for providing banking services, financial services and ancillary financial services.
Banking services are services of accepting deposits and other repayable funds from public and granting loans on their own account.
Financial services include the following services:
accepting deposits and other returnable assets,
granting of loans (including consumer loans, mortgage loans, purchase of receivables with or without recourse, financing of commercial transactions),
financial leasing (lease or rent) of assets,
payment services and electronic money issuing services,
issuing and managing other payment instruments (e.g. travellers’ cheques and bankers’ drafts),
issuing of guarantees and other sureties,
trading for own account or for the account of clients,
participation in securities issues and the provision of associated services,
cooperating in issuance of securities and connected activities,
monetary intermediation on interbank markets,
investment management and related advisory services,
safekeeping of securities and other related services,
credit rating services,
leading of safe deposit boxes; and
investment services and transactions.
Does your regulatory regime know different licenses for different banking services?
Yes. Two main types of licenses may be distinguished:
authorization to provide banking services,
authorization to provide financial and ancillary financial services.
Does a banking license automatically permit certain other activities, e.g., broker dealer activities, payment services, issuance of e-money?
No. Entities have to obtain special authorization from Bank of Slovenia to provide payment services as a payment institution or to provide electronic money issuance services.
Is there a “sandbox” or “license light” for specific activities?
Slovenian legislation does not recognize “sandbox” or “license light” framework.
Are there specific restrictions with respect to the issuance or custody of crypto currencies, such as a regulatory or voluntary moratorium?
No. Crypto currencies are not regulated in Slovenia.
What is the general application process for bank licenses and what is the average timing?
A request to issue authorization to provide banking services must be submitted to the Bank of Slovenia. To obtain authorization, an applicant must go through a formal process, which includes the completion of required application forms and the submission of supporting information. The particular forms that must be completed for submission to the regulator depend on the nature of the regulated activities being conducted.
The application form must include, among others, the following information/documentation:
a bank’s articles of association,
a bank’s business plan for the first three years of operations,
a list of persons who will obtain a qualifying holding in the bank and the amount of each holder’s qualifying holding,
a list of the persons who will be in a close relationship with the bank,
other evidence demonstrating that the conditions to issue authorization to provide banking services have been met.
The Bank of Slovenia must assess the respective request within six months from the receipt of the request. If the Bank of Slovenia has called on the applicant to supplement the request, the deadline of six months applies from the moment of supplementation of the request.
The Bank of Slovenia can reject the request if requirements regarding the legal status, the internal governance arrangements or the conditions for effective supervision of the bank are not met. If there are no reasons for the rejection, the Bank of Slovenia submits a draft decision to grant the authorization to the ECB, where the decision-making process with respect to the request continues in accordance with Regulation (EU) No. 1024/2013. ECB can either adopt the proposed draft decision or object, whereby the Bank of Slovenia must comply with ECB decision.
Is mere cross-border activity permissible? If yes, what are the requirements?
The Slovenian Banking Act does not prohibit Slovene banks from engaging in cross-border activities in accordance with applicable law. A bank that intends to establish a branch in another Member State for the purpose of providing mutually recognised financial services has to inform Bank of Slovenia or the European Central Bank. A bank that intends to establish a branch in a third country has to obtain an authorisation to establish a branch in a third country. A request must be submitted to the Bank of Slovenia.
The Slovenian Banking Act prohibits banks from third countries from engaging in banking business in Slovenia without establishing a branch. Banks from third countries have to obtain a license from Bank of Slovenia. A Member State bank may provide the mutually recognised financial services that it provides in its home Member State in accordance with the competent authority’s authorisation in the territory of the Republic of Slovenia via a branch or directly, provided that the Bank of Slovenia receives prior notification from the competent authority of the home Member State regarding the provision of services by the bank in the territory of the Republic of Slovenia via a branch or directly.
What legal entities can operate as banks? What legal forms are generally used to operate as banks?
A bank can only be organised as a public limited company or a European public limited company. In practice, banks operate as a public limited companies.
What are the organizational requirements for banks, including with respect to corporate governance?
With respect to corporate governance, a bank must have the Management board and the Supervisory board.
A bank may choose a two-tier governance system with a management board and supervisory board, or a single-tier governance system with a board of directors. The provisions regarding a bank’s supervisory board must apply mutatis mutandis to a bank’s board of directors in a single-tier governance system, while the provisions regarding a bank’s management board must be applied mutatis mutandis to executive directors.
A bank’s management board must comprise at least two members who must jointly act on behalf of and represent the bank in legal transactions. A bank’s supervisory board must appoint an audit committee and a risk committee, which may be merged by Bank of Slovenia into a single committee at the request of a bank that is not deemed a significant bank. Supervisory board must also appoint the nomination committee and the remuneration committee, which serve as the advisory bodies to the supervisory board.
Do any restrictions on remuneration policies apply?
According to the Slovenian Banking Act, a bank has to formulate remuneration policies at the level of the group, parent company and subsidiaries, including those established in areas with more favorable tax regimes (tax havens). Provisions regarding formulation of remuneration policies are general and are stipulated in the Slovenian Banking Act. Generally, it can be said that the remuneration policy has to be compatible with prudent and effective risk management, and should promote such risk management without encouraging exposure to risk that exceeds the acceptable level of risk for the bank.
Additionally, bank’s supervisory board has to appoint the remuneration committee, which has to serve as an advisory body to the supervisory board. Remuneration committee should carry out technical and independent assessments of remuneration policies and practices, and formulate initiatives for measures on the basis thereof with the aim of improving the management of the risks to which the bank is exposed, its capital and liquidity. Remuneration committee should also draw up proposals for decisions by the governing body regarding the remuneration of employees, including remuneration that impacts the risks to which the bank is exposed and the management thereof. Remuneration committee should also control the remuneration of members of senior management who perform risk management functions and ensure the compliance of operations.
Has your jurisdiction implemented the Basel III framework with respect to regulatory capital? Are there any major deviations, e.g., with respect to certain categories of banks?
As part of the full implementation of Basel III, Regulation (EU) No 575/2013 (CRR) is directly applicable in Slovenia, whereas Directive 2013/36/EU (CRD IV) has been implemented into Slovenian law by adoption of the Slovenian Banking Act (which entered into force on 13 May 2015). There are no major deviations with respect to certain categories of banks.
Are there any requirements with respect to the leverage ratio?
According to the Slovenian Banking Act, a bank has to establish and implement an appropriate policy and procedures for managing the risk of excessive leverage. For mentioned purposes, a bank has to define indicators of the risk of excessive leverage that include a leverage ratio defined in accordance with Article 429 of Regulation (EU) No 575/2013, and the mismatch of assets and liabilities. A bank has to treat the risk of excessive leverage by taking appropriate account of a possible increase in the aforementioned risk that is the result of a decrease in the bank’s capital due to expected or actual losses. To that end, a bank has to be able to withstand various stress scenarios that take into account the risk of excessive leverage.
What liquidity requirements apply? Has your jurisdiction implemented the Basel III liquidity requirements, including regarding LCR and NSFR?
According to the Slovenian Banking Act, a bank must establish and implement reliable strategies, a policy and procedures for managing liquidity risks to ensure that it maintains adequate levels of liquidity buffers at all time. In particular, the liquidity risk management should include the following:
the planning of known and potential liquidity outflows and expected liquidity inflows from assets, liabilities and off-balance-sheet items,
the regular management of liquidity for relevant time series, including on an intra-day basis,
a distinction between pledged assets and assets free of encumbrances that are available at all times, including in stress situations,
the definition of appropriate measures to prevent or eliminate the causes of liquidity deficits.
Slovenia has implemented the Basel III liquidity requirements such as liquidity coverage ratio (LCR) and net stable funding ratio (NSFR).
Do banks have to publish their financial statements? Is there interim reporting and, if so, in which intervals?
Pursuant to the Slovenian Banking Act, banks are obliged to publish their annual report on financial statements on their website within four months following the end of the calendar year. Banks are also obliged to submit their audited annual report to the Agency of the Republic of Slovenia for Public Legal Records and Related Services (AJPES) for the purpose of publication within eight months of the end of the financial year.
Banks are obliged to carry out interim reporting in connection to their financial statements to Bank of Slovenia each quarter of the year.
Does consolidated supervision of a bank exist in your jurisdiction? If so, what are the consequences?
Bank of Slovenia is responsible for supervision on a consolidated basis in case that (i) a bank is a parent bank in Slovenia or an EU parent bank or (ii) a bank is a subsidiary of a parent financial holding company or mixed financial holding company in Slovenia or an EU parent financial holding company or an EU parent mixed financial holding company.
Subsidiaries must forward to the parent bank in a group or a bank that is controlled by a parent financial holding company or parent mixed financial holding company all information that the latter requires to fulfil its obligations on a consolidated basis. Banks under the consolidated supervision must then forward all the required information to the Bank of Slovenia. Bank of Slovenia then reviews their operations for the purpose of verifying the forwarded information. The consolidated supervision is carried out in the extent and in the manner prescribed in CRR.
What reporting and/or approval requirements apply to the acquisition of shareholdings in, or control of, banks?
Any person or a group of persons that intends to acquire bank shares in order to achieve or exceed a qualifying holding (i.e. direct or indirect holding in a bank which represents 10 % or more of the capital or of the voting rights or which makes it possible to exercise a significant influence over the management of that bank) shall obtain authorization from the Bank of Slovenia prior to acquiring such a shareholding.
A request to issue authorization to acquire a qualifying holding shall be submitted to the Bank of Slovenia and must include the information on the level of participation in voting rights or in the capital of a bank that the future qualifying holder intends to acquire and the documentation and information confirming that the future qualifying holder satisfies the criteria prescribed by the Slovenian Banking Act and Regulation on holders of qualifying holdings in banks and savings banks. In accordance with the Regulation No. 1024/2013 Bank of Slovenia must forward the proposal for a decision in regards to the request to the ECB, which can oppose the acquisition on the basis of the assessment criteria set out in relevant EU law.
A qualifying holder, who carries out any further acquisition of shares, exceeding previously authorized acquisition, is obliged to obtain new authorization.
Does your regulatory regime impose conditions for eligible owners of banks (e.g., with respect to major participations)?
Prior to issuing an authorization for the acquisition of the shareholding in a bank, the Bank of Slovenia assesses the suitability of the future qualifying holder on the basis of the following criteria:
reputation of the future qualifying holder;
reputation of persons who as a result of the acquisition of a qualifying holding will have the opportunity to manage the bank or to otherwise influence its operations;
financial soundness of the future qualifying holder, particularly in connection with the types of transactions that the bank executes or is planning;
bank’s ability to act in accordance with risk management rules and to meet the requirements and restrictions set out in the Slovenian Banking Act after the acquisition of the shares;
risk in relation to the prevention of anti-money laundering and terrorist financing.
Are there specific restrictions on foreign shareholdings in banks?
Is there a special regime for domestic and/or globally systemically important banks?
Slovenia is participating in the EU’s Single Supervisory Mechanism (“SRM”), which supervises banks that are considered as significant (there are eight significant banks in Slovenia). Supervision of the significant banks is carried out by Bank of Slovenia and ECB, whereby Bank of Slovenia only participates and ECB makes the supervisory decisions.
In accordance with the Slovenian Banking Act and Regulation (EU) No. 1024/2013, Bank of Slovenia also has the power to determine banks, which are global systemically important banks (“G-SIB”) and other systemically important banks (“O-SIB”).
A G-SIB is obliged to maintain a G-SIB buffer appropriate to the G-SIB sub-category (namely, from 1% of the total risk exposure amount to the 3.5% of the total risk exposure amount), satisfying the requirement with Common Equity Tier 1 capital. An O-SIB must also maintain an O-SIB buffer, which may be set out in the amount of 2% of the total risk exposure amount and must be satisfied with Common Equity Tier 1 capital.
What are the sanctions the regulator(s) can order in the case of a violation of banking regulations?
Bank of Slovenia has the authority to impose fines in case of violations of banking regulations, whereby the fines are proportionate to the subject (banks/qualifying holders/ third persons…) and seriousness of the misdemeanor. Bank of Slovenia also has the power to withdraw the authorization to provide banking services, authorization to acquire a qualifying holding and authorization to perform the function of member of a bank’s management board.
What is the resolution regime for banks?
Slovenia adopted The Resolution and Compulsory Dissolution of Credit Institutions Act, with which it transposed the Directive No. 2014/59/EU (the “BRRD”) and implemented the Regulation (EU) No. 806/2014. Slovenia also participates in SRM and a Single Resolution Fund.
In carrying out the resolution actions, the shareholders of the bank have to be the first to cover the bank losses, followed by the other holders of capital instruments of this bank and followed by the other creditors. No creditor of the bank shall bear greater loss than they would have borne if the bank was wound up in accordance with normal insolvency proceedings. Covered deposits are fully protected.
How are client’s assets and cash deposits protected?
By adopting the Deposit Guarantee Scheme Act (which transposed the Directive 2014/49/EU), Slovenia established a deposit guarantee scheme, operated by the Bank of Slovenia. If the due and payable deposit is declared unavailable, the repayment bank (chosen by Bank of Slovenia) must repay to the depositor a deposit covered by the guarantee up to EUR 100,000. Guaranteed deposits shall be repaid within seven working days. Some client’s assets (that are the direct result of the purchase or sale of residential real estate, payouts from social insurance, etc.), are covered by the guarantee in full, i.e. above the amount of EUR 100,000.
Does your jurisdiction know a bail-in tool in bank resolution and which liabilities are covered?
Slovenia provides the Bail-in tool in accordance with the Resolution and Compulsory Dissolution of Credit Institutions Act (which transposes BRRD and implements SRM).
Bail-in tool permits Bank of Slovenia to write down the eligible liabilities in a cascading contribution to absorb losses of the resolution bank, or to convert them into ordinary shares or other instruments of ownership issued by the resolution bank or the bridge bank to which the assets, rights or liabilities of the resolution entity are transferred.
The bail-in tool may in principle be applied to all liabilities of an institution. However, specifically excluded are guaranteed deposits, secured liabilities (covered bonds), liabilities used for hedging purposes, liabilities that arise by virtue of the resolution entity holding cash or other repayable funds of clients and liabilities to the employees, creditors arising from the provision of goods or commercial services, tax and social security authorities or liabilities from deposit guarantee schemes.
Is there a requirement for banks to hold gone concern capital (“TLAC”)?
The standards on the total loss-absorbing capacity (“TLAC”) of global systemically important institutions (G-SIBs) were implemented within the amended Directive 2014/59/EU which came in force in June 27, 2019. According to the introductory provisions The Republic of Slovenia has eighteen months from the date of its entry into force (27/06/2019) to implement this Directive. However, the provisions of this Directive concerning public disclosure will apply from 1 January 2024, in order to ensure that institutions and entities across the Union are allowed an appropriate period to reach the required level of the MREL in an orderly fashion. The amended Directive has not been implemented into Slovenian law yet.
In regards to the gone concern capital, pursuant to Basel III Slovenian banks are required to hold gone concern capital, i.e. Tier 2 capital in accordance with and as set out in the CRR.
In your view, what are the recent trends in bank regulation in your jurisdiction?
In late October 2019 The Bank of Slovenia found that the risks associated with consumer lending remained elevated, despite its recommendations to banks and consumers with regard to the maintenance of moderate growth of consumer loans. Given a high level of deviations from the recommendations in two areas in particular, namely the debt service to income ratio, and the average maturity of consumer loans, which in certain cases even exceeded 12 years, the Bank of Slovenia changed the recommendation into a binding instrument which came into force as of November. The Bank of Slovenia placed caps on the maturity of consumer loans, and the ratio of the annual debt servicing costs to the borrower’s net income (DSTI). The decision was met with fierce public disapproval as the second requirement also applies to housing loans.
What do you believe to be the biggest threat to the success of the financial sector in your jurisdiction?
In 2020, bank liquidity gap continues to be the subject of public and expert disputes, as relevant questions (such as the size of the liquidity gap, the responsible for the formation and questionable management and supervision of the banks) remain unsolved. Moreover, the liquidity gap recovery was non-transparent and resulted in multiple banks being sold to the foreign investment funds. In our opinion non-transparent recovery of the liquidity gap and insufficient prosecution of the crimes related to the banking sector represent threats to the Slovenian banking sector in the future.