Slovene Police Raid Central Bank in Probe Into 2013 Bailoutsby and
First such investigation taking place at Bank of Slovenia
Probe looking at equity assessments in 2013 industry overhaul
Slovenian police sent investigators to the central bank and three other locations to seek information about possible wrongdoing during the 2013 overhaul of the country’s banking industry.
Central bank employees were questioned for the first time in a probe of this kind, Bojana Leskovar, a spokeswoman for the Bank of Slovenia, said without elaborating. Police said they had "well-founded reasons to suspect” that some legal entities abused their office in valuing equity at a bank rescued by the state in 2013. The assessment allowed the lender to scrap liabilities to subordinated debt holders, resulting in a 257 million-euro ($284 million) benefit for that bank, according to a statement on the police website.
The European Union’s Court of Justice in Luxembourg is expected to publish an opinion within weeks on whether guidelines the European Commission gave Slovenia regarding the participation of subordinated bondholders in the bailout process were legally binding, Ljubljana-based newspaper Delo reported. About 2,000 investors holding about 600 million euros of subordinated debt were affected by the bank overhaul, Delo said.
While Slovenia may face one-time costs and an increase in public debt based on the EU court ruling, the outcome risks wider implications for bank rescues across Europe, Saso Stanovnik, an analyst at Alta Invest in Ljubljana, said by phone.
“If the European Court says that those holders of subordinated debt should be compensated it will create more problems for the European Union than for Slovenia,” Stanovnik said.
Premier Miro Cerar’s cabinet is planning to sell state-owned banks to try and recoup some of the 3 billion euros spent to boost capital at Nova Ljubljanska Banka, NKBM and Abanka after 2013 stress tests unveiled shortfalls. Slovenia later set up a Bank Asset Management Company to acquire lenders’ non-performing claims.