Banking Regulation 2022

Last Updated September 17, 2021

Slovenia

Law and Practice

Authors



Law Firm Rojs, Peljhan, Prelesnik & Partners is the largest Slovenian corporate and commercial law firm, with an excellent legal team that is recognised for its comprehensive legal solutions, extensive knowledge and long-standing experience. The banking and finance team advises numerous international and domestic financial institutions and companies on a broad range of complex legal issues related to banking and finance matters, including raising capital, complex regulatory capital issues, corporate and financial restructurings, distressed asset management and NPL sales. It was part of the first and only bank spin-off where NPLs and other assets were transferred to a “bad bank” entity. The firm has extensive experience in advising foreign clients on the cross-border provision of regulated and non-regulated services, securitisations, derivatives (ISDA and related collateral arrangements) and the preparation of client-specific derivatives agreements. It is also active in insurance regulatory matters, advising Generali on its acquisition of one of the largest Slovenian insurance companies and on the subsequent merger of two insurance companies.

The basic tenets of the Slovenian banking regulation regime ensure the long-time stability of banks in Slovenia, balanced with the need to foster growth and develop new opportunities for both banks and their clients.

Slovenian banking regulation can be divided into EU rules (which are transposed or apply directly), national banking laws, other financial regulations and regulation by the Slovenian banking regulator.

EU Laws

The EU laws are as follows:

  • the Single Supervisory Mechanism (SSM) and other rules regarding a harmonised European regulatory framework applying to banking institutions;
  • the Single Resolution Mechanism (SRM);
  • the CRD IV package, which transposes the global standards on bank capital (commonly known as the Basel III agreement) into the EU legal framework, including Directive 2013/36/EU on capital requirements (CRD IV) and Regulation (EU) 575/2013 on prudential requirements for credit institutions and investment firms (CRR); and
  • other sectoral regulations such as Regulation (EU) 2017/2402 laying down a general framework for securitisation and creating a specific framework for simple, transparent and standardised securitisation (the Securitisation Regulation) and Council Regulation (EU) No 1024/2013 conferring specific tasks on the European Central Bank (ECB) concerning policies relating to the prudential supervision of credit institutions.

National Law

The core national law is the Slovenian Banking Act (Zakon o bančništvu – Zban-3), which regulates the conditions for the establishment of banks and their functioning, corporate governance, capital maintenance requirement and business. The Banking Act transposes and incorporates several EU-wide directives and regulations, including CRV IV and CRR.

The Financial Conglomerates Act (Zakon o finančnih konglomeratih – ZFK) regulates the monitoring and auditing of financial conglomerates in an effort to reduce risks stemming from transactions between connected entities.

Consumer crediting is governed by the Slovenian Consumer Credit Act (Zakon o potrošniških kreditih – ZPotK-2), which sets out the conditions under which lenders, including banks, may provide loans to consumers.

The Deposit Guarantee Scheme Act (Zakon o sistemu jamstva za vloge – ZSJV) governs the deposit guarantee scheme, which ensures depositor guarantees for deposits in Slovenian banks.

Other Pertinent Financial Laws

With respect to financial markets, the primary legislative act is the Slovenia Market in Financial Instruments Act (Zakon o trgu finančnih instrumentov – ZTFI-1), which transposes EU rules on financial markets, specifically Directive 2014/65/EU (MiFID II). Investment funds are captured by the Investment Funds and Management Companies Act (Zakon o investicijskih skladih in družbah za upravljanje – ZISDU-3), which regulates how investment funds should be managed and marketed, among other matters. The management and marketing of alternative investment funds is regulated in the Alternative Investment Fund Managers Act (Zakon o upravljavcih alternativnih investicijskih skladov – ZUAIS).

Finally, the Payment Services, Services for Issuing Electronic Money and Payment Systems Act (Zakon o plačilnih storitvah, storitvah izdajanja elektronskega denarja in plačilnih sistemih – ZPlaSSIED) regulates e-money and payment services.

Regulatory Authorities

The supervisory authority for banks in Slovenia is the Bank of Slovenia (Banka Slovenije). The Slovenian Securities Market Agency (Agencija za trg vrednostnih papirjev) regulates the market in financial instruments. While both adopt decisions on general matters within their jurisdiction, which affect how banks may operate, the Bank of Slovenia is in charge of monitoring and regulating banks.

Depending on its activity, a company can apply for many different licences, including the credit institution licence (colloquially known as the banking licence), which is obtained pursuant to the Banking Act and Council Regulation (EU) No 1024/2013. This licence typically also includes several of the lower-ranked licences for individual services.

A company can also apply for a payment institution licence, a consumer credit licence or an investment services licence.

Credit Institution Licence

Under Slovenian law, banking services may only be performed by the following:

  • banks that have obtained a licence pursuant to the Banking Act;
  • EU Member State banks that have notified their performance of services via the EU Passporting regime; and
  • third-country banks that have obtained a licence to establish a bank branch office from the Bank of Slovenia.

Banking services are defined as accepting deposits and other repayable funds from the public and giving loans for own account.

Consumer Credit Licence

Companies that provide credit to consumers require a consumer credit licence, which must be obtained from the bank of Slovenia before services are commenced. However, a credit institution does not require a separate consumer credit licence.

Payment Institution Licence

A company that provides payment services or issues e-money requires a payment institution licence. A credit institution may also apply for a licence to perform such services when filing for a credit institution licence.

Investment Services Licence

Investment services in Slovenia may be performed by the following:

  • a brokerage firm that is licensed by the Slovenian Securities Market Agency;
  • an investment firm from an EU Member State that has passported its services to Slovenia; or
  • a third-country firm that has obtained a permit from the Agency to establish a branch.

Investment services may also be provided by a bank that has obtained a licence from the Bank of Slovenia for the provision of such services. A bank has to request such a licence explicitly from the Bank of Slovenia.

Investment services include the following:

  • the reception and transmission of orders in relation to one or more financial instruments;
  • the execution of orders on behalf of clients;
  • dealing on own account;
  • portfolio management;
  • providing investment advice;
  • initial or subsequent underwriting and/or the placing of financial instruments on a firm commitment basis;
  • the initial or subsequent placing of financial instruments without a firm commitment basis;
  • the operation of multilateral trading facilities; and
  • the operation of organised trading facilities.

Filing a Request and Statutory Conditions

Before a bank can be incorporated, it has to obtain a licence from the Bank of Slovenia and the ECB.

The Bank of Slovenia reviews whether the following requirements for the new bank are fulfilled pursuant to the Banking Act:

  • whether the bank fulfils the necessary statutory and corporate conditions;
  • whether the owners have a licence to obtain a qualified holding in the bank;
  • whether the bank has stable internal governance arrangements; and
  • whether the bank meets the conditions for effective supervision in accordance with the Banking Act and Regulation (EU) No 575/2013, particularly if such supervision is hindered due to the bank’s close relationships with other persons.

If these conditions are not fulfilled, the Bank of Slovenia denies the application for a licence. If the conditions are fulfilled, the Bank of Slovenia submits the filing to the ECB, which grants a permit pursuant to Regulation (EU) No 575/2013.

The whole process is quite lengthy. By law, the Bank of Slovenia has up to six months to decide on a request for a licence, but any request for supplementation effectively freezes this deadline so the process can take longer, depending on the additional information requested by the Bank of Slovenia.

Any person intending to acquire bank shares in order to achieve or exceed a qualifying holding must obtain previous authorisation from the Bank of Slovenia. This includes persons who have agreed to act in concert to acquire bank shares with the aim of concluding a shareholders’ agreement.

Thresholds

The authorisation to acquire a qualifying holding sets out the level of participation in the voting rights or capital of a bank for which authorisation is issued, in one of the following ranges:

  • participation in the voting rights or capital of a bank that is equal to or greater than the qualifying holding and less than 20%;
  • participation in the voting rights or capital of a bank that is equal to or greater than 20% and less than 1/3;
  • participation in the voting rights or capital of a bank that is equal to or greater than 1/3 and less than 50%;
  • participation in the voting rights or capital of a bank that is equal to or greater than 50%; or
  • participation based on which a future qualifying holder becomes the parent entity of a bank.

The Bank of Slovenia assesses the suitability of the future qualifying holder on the basis of the following criteria:

  • their reputation;
  • the reputation, knowledge, skills and experience of all members of management and supervisory bodies and all senior management staff who will be afforded the opportunity to manage the bank or to otherwise influence the bank’s operations if the future qualifying holder acquires the qualifying holding that is the subject of the request;
  • their financial soundness, particularly in connection with the types of transactions that the bank executes or is planning; and
  • the likely consequences of the successful acquisition of the qualifying holding on the bank’s ability to act in accordance with risk management rules and to meet the requirements and restrictions set out in the Banking Act, Regulation (EU) No 575/2013 and other regulations that apply to the bank.

The intended acquirer of a qualifying holding must obtain an authorisation prior to obtaining shares in the bank and must file a request with the Bank of Slovenia.

A bank has to be structured as a joint-stock company; no other forms of legal entity are allowed.

A bank may have either a dual-tier system of corporate governance with a management board and supervisory board members, or a single-tier system of corporate governance with executive and non-executive members of the board.

While no specific codes relate to the banking sector, most banks are subject to the Management code for publicly traded companies. Most banks are a part of global banking groups, which have their own group-level governance codes.

As a general rule, a bank’s governing body must be composed in such a manner that it possesses the relevant knowledge, skills and experience required for the in-depth understanding of the bank’s activities and the risks to which it is exposed.

The bank itself must implement a process for assessing the suitability of members of its governing body both prior to their appointment and afterwards should circumstances arise that require the reassessment of suitability, and at least once a year.

One aspect that must be assessed pursuant to the Banking Act is the compatibility of the number of other directorships the bank’s governing body members can hold at the same time.

There must be at least two management board members, who jointly act on behalf of and represent the bank in legal transactions. It is prohibited for management members to have sole representation rights. At least one member of the management board shall have sufficient knowledge of the Slovenian language to properly perform their duties as a member of a bank’s management board.

The function of a member of a bank’s management board may only be performed by a person who has obtained authorisation to do so.

A bank must formulate a remuneration policy that encompasses all remuneration and considers the size of the bank, its internal organisation and the nature, scope and complexity of the bank’s activities.

The remuneration policies apply to categories of employees who could have a material impact on the bank’s risk profile in the scope of their competences or work tasks and activities, including the following in particular:

  • the management board and senior management;
  • management functions within the internal control system and other independent control functions at the bank;
  • employees who, in the scope of their competences, may conclude transactions that have an impact on the bank's risk profile; and
  • other employees whose total remuneration is equal to or exceeds the remuneration of senior management or employees who have a material impact on the bank’s risk profile.

A bank must take into account the following principles when determining its remuneration policy and practices:

  • that the remuneration policy is compatible with prudent and effective risk management and thus also promotes risk management, without encouraging exposure to risks that exceed the level of acceptable risk for the bank;
  • that the remuneration policy is gender neutral;
  • that the remuneration policy is in line with the business strategy, goals, values and long-term interests of the bank and includes measures to prevent conflicts of interest;
  • that employees performing control functions are independent of the business units they supervise and have appropriate powers and receive remuneration in relation to the achievement of the objectives related to their functions, regardless of the performance of the business areas they supervise; and
  • that the remuneration policy clearly distinguishes between the criteria for determining the following:
    1. fixed remuneration, which should particularly reflect the relevant professional experience and responsibilities in the bank, as set out in the employee's job description as part of the conditions of employment; and
    2. variable remuneration, which must reflect sustainable and risk-adjusted performance and performance that is higher than expected performance, as specified in the description of the employee's work tasks, which are part of the employment conditions.

There are further principles for determining the variable part of any renumeration, taking into account that it should be based on the success of the individual and the bank, that it should not exceed 100% of the fixed remuneration, etc.

The bank should generally have a remuneration committee, which is an advisory body to the supervisory board and manages any risks related to remuneration. If the bank does not have such a committee, the supervisory board must review its remuneration policies and payments.

The Bank of Slovenia will invariably review remuneration policies in the event of a breach or the unsustainability of capital maintenance requirement rules. It may also limit the variable remuneration of employees if the payment of such amounts would jeopardise the fulfilment of the bank's capital adequacy obligations or objectives.

Moreover, the Banking Act prescribes a fine of between EUR25,000 and EUR250,000 for a bank that does not ensure the functioning of a committee to review remuneration. The responsible management and supervisory board members face a fine of between EUR2,500 and EUR10,000, or potentially up to EUR5 million if the breach is especially severe. Other responsible bank employees face a fine of between EUR800 and EUR10,000, or between EUR2,500 and EUR30,000 in the case of a severe breach.

Anti-money laundering legislation is regulated in the Prevention of Money Laundering and Terrorist Financing Act (Zakon o preprečevanju pranja denarja in financiranja terorizma – ZPPDFT-1), which transposes the fifth European Anti-Money Laundering directive (Directive (EU) 2018/843).

Banks are considered obligated persons under the AML Act, and have general duties regarding identifying the identify of their customers. This includes identifying the client and its ultimate beneficial owners, obtaining information on the intent and envisaged nature of the business relationship and transaction, and regularly monitoring the business activities of the client.

Banks also have to adopt the necessary internal controls for risk management, which include the identification of politically exposed individuals.

Banks have a specific duty to verify the identify and status of credit or financial institutions from other EU Member States or third countries in the event of concurrent relationships between credit and financial institutions. This includes requesting data on the licence of the credit/financial institution and a description of the systemic AML and CTF regulation that applies in the Member State or third country.

The Bank of Slovenia has adopted a decision requiring banks to annually report circumstances that could give rise to increased risk of money laundering or financing terrorism. Such reports should include information on:

  • inherent risk, including information on risks of individual groups or types of customers, geographical risks, risks relating to products, services, transactions and distribution channels, and other risks; and
  • a control environment with information on the system of internal policies, procedures and controls established by the obligor in order to mitigate the risks of money laundering and terrorist financing.

The Depositor Protection Regime is based on EU regulation, as most recently updated with Directive 2014/49/EU of the European Parliament and of the Council on deposit guarantee schemes, which has been in force since July 2014.

Directive 2014/49/EU was transposed into the Slovenian legal system by the Deposit Guarantee Scheme Act.

The deposit guarantee scheme in Slovenia is operated by the Bank of Slovenia, which does the following:

  • establishes and manages the deposit guarantee fund;
  • collects the banks’ regular and ad hoc contributions to the deposit guarantee fund, and enters into agreements on other forms of financing the fund;
  • puts in place, vets and updates the procedures and arrangements for the repayment of coverage of guaranteed deposits (including stress testing);
  • conducts activities for using the deposit guarantee fund to finance measures of bank recovery or compulsory dissolution – ie, measures that ensure that depositors retain access to guaranteed deposits; and
  • supervises members of the deposit guarantee scheme (all banks and savings banks established in Slovenia are included in the system in Slovenia, as are branches of third-country banks) with regard to their fulfilment of the obligations of membership.

Which Deposits Are Covered?

The deposits of private individuals, private individuals pursuing registered business activities, sole traders and legal entities (corporates) are covered by the deposit guarantee scheme.

The deposit guarantee scheme does not cover the following deposits:

  • deposits in bearer form, including deposits for which the bank has not obtained the requisite information for the identification of the actual beneficiaries by the cut-off date for the calculation of the guarantee;
  • deposits by banks, investment firms and other financial institutions made on their behalf and for their account;
  • deposits by insurance undertakings, reinsurance undertakings and insurance holding companies;
  • deposits by collective investment undertakings, including investment undertakings of the closed-ended type;
  • deposits by pension funds and pension companies;
  • deposits by states and central banks and deposits of entities that are direct or indirect users of the state budget; and
  • deposits by local communities and deposits by direct and indirect users of the budgets of local communities.

The total amount of the guarantee for a deposit is EUR100,000.

The total of guaranteed deposits amounted to EUR22.32 billion as of 31 December 2020. Banks pay an annual amount until the guarantee scheme reaches the necessary level. The amount paid per bank is determined by the number of guaranteed deposits held by a bank, compared to other banks. This can be supplemented by extraordinary contributions imposed by the Bank of Slovenia.

Pursuant to the Banking Act, all data, facts and circumstances at a bank’s disposal regarding an individual client are considered to be confidential data, subject to bank secrecy.

A bank has a duty to protect such confidential data, regardless of the manner in which it was obtained. Internally, this means that the members of a bank’s bodies, its shareholders and employees, or other persons to whom the confidential data is in any way accessible in the course of their work in the bank or while they are providing services for the bank, may not disclose this data to third parties, nor enable a third party to make use of it, nor use it for their own purposes.

Exceptions to Banking Secrecy

The principal exceptions to secrecy are as follows:

  • if a client provides their explicit written consent to the disclosure of certain confidential data;
  • if this data is needed by the Bank of Slovenia, the ECB or a supervisory authority for the supervision of a bank that it manages in the scope of its powers;
  • if such data is required in writing by a commission for the prevention of corruption or by a court, state prosecutor's office or the police for conducting pre-trial or criminal proceedings, except in cases when an Act explicitly requires an order from an investigating judge for the forwarding of confidential data;
  • when data is forwarded to parent entities in connection with supervision on a consolidated basis in accordance with the provisions on the monitoring of consolidated entities or pursuant to the Financial Conglomerates Act;
  • if this data is requested in writing by a commission of inquiry when, in accordance with the law governing parliamentary inquiries, it conducts an inquiry;
  • if this data is required in writing by the Court of Audit of the Republic of Slovenia at the implementation of its powers in accordance with the law governing the Court of Audit;
  • for the exchange of information regarding client credit ratings for the purpose of credit risk management:
    1. between members of a system for such exchange that is established in accordance with the regulations for the purposes of credit risk management of banks; or
    2. with Member State banks or systems for the exchange of information regarding client credit ratings organised in other Member States with regard to information on the credit ratings of clients that are legal persons;
  • if such data is forwarded to a prosecutor or the police for the purpose of notifying those authorities of reasons to suspect that a criminal act has been committed;
  • if the disclosure of confidential information is required in order to carry out negotiations for the conclusion of an agreement or to fulfil an agreement that the bank concludes in the scope of standard banking activities, and if the recipient ensures appropriate protection of the confidentiality of data; and
  • in other cases where a law explicitly determines a bank’s obligation with regard to the forwarding of confidential data regarding an individual client.

In all instances of disclosure, the bank shall ensure that it is possible to subsequently establish which confidential data was forwarded, to whom, when and on what basis, for a period of ten years following the forwarding of that data.

Breach of Secrecy

The Banking Act prescribes a fine of between EUR25,000 and EUR250,000 for a bank in the event of a breach of a confidentiality obligation. The responsible management and supervisory board members face a fine of between EUR2,500 and EUR10,000, or potentially up to EUR5 million if the breach is especially severe. Other responsible bank employees face a fine of between EUR800 and EUR10,000, or between EUR2,500 and EUR30,000 in the case of a severe breach.

Status of Basel III Standards in Slovenia

Basel Committee positions are not a formal source of law in Slovenia, but the standards have made their way into the Banking Act by way of EU legislation. The Bank of Slovenia is also active in the development of new standards in the Committee.

Both the CRD IV and CRR transpose the Basel III capital standard, and these are now part of law in the Banking Act.

Minimal Capital Requirement

A bank must have a minimal initial share capital of EUR5 million, which may be comprised of one or more elements from points (a) to (e) of Article 26(1) of the CRR:

  • capital instruments, provided the conditions laid down in Article 28 or, where applicable, Article 29 of the CRR are met;
  • share premium accounts related to these instruments;
  • retained earnings;
  • accumulated other comprehensive income; and
  • other reserves.

Risk Management Rules for Banks

The Banking Act requires the management board to organise a risk management function that reports directly to the management board and that is functionally and organisationally separated from the bank’s other functions in which conflicts of interest could arise vis-à-vis the risk management function.

The risk management function should ensure:

  • that all significant risks are identified, assessed or measured, and reported appropriately;
  • active participation in the drafting of the bank’s risk management strategy and in all important decisions regarding risk management; and
  • the formulation of a comprehensive overview of the risks to which the bank is or could be exposed in its operations.

In terms of substantive rules, the Banking Act relies on the CRR in determining the relevant banking ratios (such as capital ratios, the leverage ratio, the net stable funding ratio and the liquidity ratios).

There are currently eight systemically important banks in Slovenia, and they have to maintain different capital buffers, which are reviewed annually by the Bank of Slovenia.

Insolvency proceedings are generally governed by the Slovenian Financial Operations, Insolvency Proceedings and Compulsory Dissolution Act (Zakon o finančnem poslovanju, postopkih zaradi insolventnosti in prisilnem prenehanju – ZFPPIPP), which provides for the following types of insolvency proceedings:

  • compulsory settlement procedures;
  • simplified compulsory settlement procedures; and
  • bankruptcy proceedings.

The general rules regarding insolvency also apply to banks. However, insolvency proceedings cannot be instituted against a credit institution on the basis of the general insolvency act, but rather under a specific act for the resolution of banks.

The Resolution and Compulsory Winding-Up of Banks Act (Zakon o reševanju in prisilnem prenehanju bank – ZRPPB-1) transposes Directive 2014/59/EU establishing a framework for the recovery and resolution of credit institutions and investment firms (the BRRD) into Slovenian law, and sets out in detail the implementation of Regulation (EU) No 806/2014 establishing uniform rules and a uniform procedure for the resolution of credit institutions and certain investment firms in the framework of a Single Resolution Mechanism and a Single Resolution Fund.

The Resolution Act regulates:

  • the powers of the Bank of Slovenia and the procedures it conducts as the bank resolution authority;
  • bank resolution planning;
  • resolution procedures and authorisations in connection with the implementation of resolution measures;
  • the procedure for the compulsory winding-up of a bank; and
  • a mechanism for the collection and transfer of ex-ante and extraordinary ex-post contributions by banks established in Slovenia to the Single Resolution Fund.

General Principles

In applying the resolution actions, the Bank of Slovenia must comply with the following principles:

  • the shareholders of the bank in resolution proceedings are the first to cover the losses;
  • other holders of capital instruments of this bank are then to cover the losses, followed by other creditors in the reverse order of priority than applies to the payment of claims against the resolution entity under normal insolvency proceedings;
  • the management body and senior management of a bank in resolution proceedings will normally be replaced, except when it is appropriate in the circumstances and necessary for the achievement of the resolution objectives for the management body and senior management to maintain their functions, in whole or in part;
  • the management body and senior management of a bank in resolution proceedings must provide all assistance necessary for the achievement of the resolution objectives;
  • the liability of individuals and legal persons for a bank failure must be enforced in accordance with the general rules on contractual, damages and criminal liability;
  • creditors of the same priority class must be treated equally, except in cases for which the Resolution Act provides otherwise;
  • generally no creditor of the bank must suffer greater loss than they would have borne if the bank was wound-up in accordance with normal insolvency proceedings; and
  • covered deposits are fully protected.

Status of Deposits

Those deposits that are covered by the guarantee scheme (see 6.1 Depositor Protection Regime) will be secured up to the amount provided by law (EUR100,000), so depositors are guaranteed repayment for this amount. For all amounts above this amount, they still may have a valid claim against the bank.

Any regulatory changes that take place will invariably be a result of changes in European rules. At the forefront are anticipated changes in how to regulate cryptocurrencies or crypto-assets.

In this respect, the Bank of Slovenia has followed the position of the ECB and the European Banking Authority that cryptocurrencies are not considered a currency, e-money or anything that could fit within the current regulatory framework.

In terms of national law, there is a hope and expectation that certain AML and identification obligations will be amended to further support the ever-growing digitalisation of banking services.

There has been a recent push for digitalisation and bureaucratisation from the government, which aims to shake things up and allow for easier access to services. One of the proposed suggestions pertains to e-public notary services. As public notary services are required for the perfection of real estate mortgages, the digitalisation and simplification of such services could spur the real estate market and consumer credit market to new growth.

That being said, there are several steps that need to be addressed and finalised to allow for such a revolution.

Law Firm Rojs, Peljhan, Prelesnik & Partners

Tivolska cesta 48
1000 Ljubljana
Slovenia

+386 1 2306 750

+386 1 4325 123

office@rppp.si www.rppp.si
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Trends and Developments


Authors



Law Firm Rojs, Peljhan, Prelesnik & Partners is the largest Slovenian corporate and commercial law firm, with an excellent legal team that is recognised for its comprehensive legal solutions, extensive knowledge and long-standing experience. The banking and finance team advises numerous international and domestic financial institutions and companies on a broad range of complex legal issues related to banking and finance matters, including raising capital, complex regulatory capital issues, corporate and financial restructurings, distressed asset management and NPL sales. It was part of the first and only bank spin-off where NPLs and other assets were transferred to a “bad bank” entity. The firm has extensive experience in advising foreign clients on the cross-border provision of regulated and non-regulated services, securitisations, derivatives (ISDA and related collateral arrangements) and the preparation of client-specific derivatives agreements. It is also active in insurance regulatory matters, advising Generali on its acquisition of one of the largest Slovenian insurance companies and on the subsequent merger of two insurance companies.

Banking Regulation in Slovenia

In recent years, banking regulation has been further consolidated with EU banking and financial market rules, finally clarifying long-running debates on outstanding issues.

In 2021, amendments were adopted for the Slovenian Market in Financial Instruments Act, the Alternative Investment Fund Managers Act and the Investment Funds and Management Companies Act to transpose EU Directive 2019/2034 on the prudential supervision of investment firms and EU Directive 2019/2177 on the sharing of financial system information.

EU legislation has generally been the main driver for updates to Slovenian legislation. There was quite a delay in transposing the MiFID II directive into Slovenian law, but the majority of the legislation has now been transposed.

Fintech Propels Traditional Banking Establishments

Traditionally, Slovenian banks were averse to mobile banking, with several banks lacking in proper mobile phone applications for banking. However, fintech has succeeded in disrupting the Slovenian banking market, and the presence of foreign EU banks offering their services in Slovenia under the banking passport regime has forced Slovenian banks to modernise rapidly.

Thankfully, regulation has maintained pace with the digitalisation of services, at least to some extent. For instance, under the Slovenian Consumer Credit Act (Credit Act), before a creditor gives a loan to a consumer, it must verify the credit-worthiness of a consumer prior to the conclusion of a credit agreement. To do so, the creditor has to access the national central credit register, which it can do only if the person’s identity has been verified. Accessing the credit register is only allowed for in-person or digital identity identification, but the rules have recently been amended by the Bank of Slovenia (the Slovenian banking regulator) to allow for electronic video identification under certain conditions.

This is a step in the right direction, but is still a far cry from fully digitalising access for banking services, especially for foreign banks. However, more revolutionary developments would require a more systemic change in Slovenian law.

For instance, a mortgage on real estate for consumer credits can only be established in the form of a notarial deed, pursuant to the Credit Act. Notarial deeds are documents that are strict in structure and form, require the presence of a notary, and have to be entered in Slovenian (with some exceptions) in person (or via a power of attorney in the proper form). Any digitalisation of mortgage credits would necessitate the institution of e-notarial services. While there has been talk of such changes, it is unclear whether they will actually be adopted.

New Banking Act

A new Banking Act was adopted on 27 July 2021 (ZBan-3). The majority of the legislative solutions concern the transposition of several EU Directives, and the majority of the adoptions pertain to capital maintenance requirements and governance rules for credit institutions. Some changes were also made to reflect recent court practice. For instance, a part of the previous law was considered unconstitutional as it did not allow the participation of employees in the management of banks. This has now been amended.

The Open Question of Reverse Solicitation

After quite a long period of uncertainty, the Slovenian Market in Financial Instruments Act finally defined the concept of reverse solicitation, with Article 215 providing that a third-country investment company may perform an individual investment service or deal if the company requests it of its own accord. This was a step towards clarifying this regime, but some confusion remained in the market as to how to classify follow-up marketing and sales.

The new 2021 amendment to the Act clarified that follow-up marketing – whereby the investment firm would market its services to the client that requested services based on reverse solicitation – is not considered reverse solicitation, and a branch office must be established. Marketing or offering investment services via other entities or affiliated persons is also not allowed.

Status of Crypto-Assets

The current position of the Bank of Slovenia follows that of the ECB and the EBA, which is that cryptocurrencies cannot be considered as money or e-money and are thus outside the current regulatory framework. However, once the question of the status of cryptocurrencies is regulated at an EU level, it is expected that Slovenian legislators will follow.

This has the potential to affect a wide variety of crypto start-ups. Internationally, Slovenia has been seen as a crypto-friendly space, which supports such industries. So far, Slovenian authorities have assisted this position to an extent by publicly stating that they do not consider classic cryptocurrencies (which are not tied to classical assets or securities) as being subject to regulation.

However, with the evolution of crypto-products and facilities, including lending and decentralised finance, there are calls for either a new confirmation or clarification of how the market should and could be regulated. Numerous failed or deceitful projects have made the calls for regulation louder.

Law Firm Rojs, Peljhan, Prelesnik & Partners

Tivolska cesta 48
1000 Ljubljana
Slovenia

+386 1 2306 750

+386 1 4325 123

office@rppp.si www.rppp.si
Author Business Card

Law and Practice

Authors



Law Firm Rojs, Peljhan, Prelesnik & Partners is the largest Slovenian corporate and commercial law firm, with an excellent legal team that is recognised for its comprehensive legal solutions, extensive knowledge and long-standing experience. The banking and finance team advises numerous international and domestic financial institutions and companies on a broad range of complex legal issues related to banking and finance matters, including raising capital, complex regulatory capital issues, corporate and financial restructurings, distressed asset management and NPL sales. It was part of the first and only bank spin-off where NPLs and other assets were transferred to a “bad bank” entity. The firm has extensive experience in advising foreign clients on the cross-border provision of regulated and non-regulated services, securitisations, derivatives (ISDA and related collateral arrangements) and the preparation of client-specific derivatives agreements. It is also active in insurance regulatory matters, advising Generali on its acquisition of one of the largest Slovenian insurance companies and on the subsequent merger of two insurance companies.

Trends and Development

Authors



Law Firm Rojs, Peljhan, Prelesnik & Partners is the largest Slovenian corporate and commercial law firm, with an excellent legal team that is recognised for its comprehensive legal solutions, extensive knowledge and long-standing experience. The banking and finance team advises numerous international and domestic financial institutions and companies on a broad range of complex legal issues related to banking and finance matters, including raising capital, complex regulatory capital issues, corporate and financial restructurings, distressed asset management and NPL sales. It was part of the first and only bank spin-off where NPLs and other assets were transferred to a “bad bank” entity. The firm has extensive experience in advising foreign clients on the cross-border provision of regulated and non-regulated services, securitisations, derivatives (ISDA and related collateral arrangements) and the preparation of client-specific derivatives agreements. It is also active in insurance regulatory matters, advising Generali on its acquisition of one of the largest Slovenian insurance companies and on the subsequent merger of two insurance companies.

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