03
Sun, Mar
42 New Articles

Banking & Finance in Slovenia

Banking & Finance in Slovenia

Briefings
Tools
Typography
  • Smaller Small Medium Big Bigger
  • Default Helvetica Segoe Georgia Times

Contributed by Jerovsek & Malis.

I. LEGAL FRAMEWORK

1.1. Which main legislative and regulatory provisions govern the banking sector in your jurisdiction?

The principal law governing the banking sector in Slovenia is the Banking Act (ZBan-3; Official Gazette of Republic of Slovenia, no. 92/21, as amended), whereas the prudential regulatory framework for banks comprises a range of different EU and national regulations, supplemented by regulations, implementing technical standards, guidelines and recommendations issued by the European Central Bank (ECB) and the European Banking Authority (EBA). As in other EU member states, the majority of the applicable banking regulations in Slovenia implement and/or are based on EU directives and regulations. The Bank of Slovenia as the competent national authority also issues guidelines for the general and more detailed uniform interpretation and application of the banking regulations and for the formulation of best practices.

An essential additional regulation applicable to all entities in the banking sector (as well as other financial institutions) is contained in the Prevention of Money Laundering and Terrorist Financing Act (ZPPDFT-2; Official Gazette of Republic of Slovenia, no. 48/22, as amended).

In addition to the above, there are other relevant legislative provisions that also affect the banking sector, such as:

  • The Payment Services, Services for Issuing Electronic Money and Payment Systems Act (ZPlaSSIED; Official Gazette of Republic of Slovenia, no. 7/18, as amended);
  • The Takeovers Act (ZPre-1; Official Gazette of Republic of Slovenia, no. 79/06, as amended);
  • The Act Implementing the Regulation (EU) laying down a general framework for securitization and creating a specific framework for simple, transparent, and standardized securitization (ZIUDSOL; Official Gazette of Republic of Slovenia, no. 22/19);
  • The Resolution and Compulsory Winding-Up of Banks Act (ZRPPB-1; Official Gazette of Republic of Slovenia, no. 92/21)

and other.

1.2. Which bodies are responsible for enforcing the applicable laws and regulations? What are their main competencies?

The Bank of Slovenia is the competent authority responsible for the supervision of banks in accordance with the Banking Act and Regulation 1024/2013, except with regard to the tasks and powers of prudential supervision for which the European Central Bank is responsible in accordance with Regulation 1024/2013.

  • Bank of Slovenia (Banka Slovenije)

The Bank of Slovenia is the central bank of the Republic of Slovenia and the Regulator in the banking sector. It was established by the Bank of Slovenia Act, which governs its status, competence, and governance.

The Bank of Slovenia’s competencies are based on four main pillars:

(1) Monetary policy relates to the central bank’s decisions that exert an influence on prices and the availability of money in the economy. Under the Bank of Slovenia Act, maintaining price stability is the objective of the Bank of Slovenia, and it is also the primary objective of the European System of Central Banks.

(2) Micro-prudential (banking system) supervision is part of the Bank of Slovenia’s mandate relating to the maintenance of financial stability. The Bank of Slovenia defines, implements, and supervises the system of prudential rules for the operation of banks and savings banks in the Republic of Slovenia. The objective of the Bank of Slovenia’s supervisory activities is to identify risks in all areas of the operations of banks and savings banks, such as credit risk, liquidity risk, operational risk, capital risk, interest rate risk, profitability risk, internal controls, corporate governance, reputation, anti-money laundering. The Bank of Slovenia examines compliance with the relevant legislative provisions, grants and withdraws authorizations in accordance with the applicable laws, sets out capital requirements, and is responsible for processing notifications under the ZBan-3.

The competencies in the area of micro-prudential supervision are divided between the Bank of Slovenia and the ECB (see below).

*In contrast to prudential supervision, non-prudential supervision is exclusively the responsibility of the Bank of Slovenia. The central focus of this supervision is anti-money laundering and countering the financing of terrorism (AML/CFT), which in addition to banks and savings banks covers other institutions that are supervised by the Bank of Slovenia in accordance with the ZPPDFT-2 (payment institutions, electronic money institutions, currency exchange offices, and entities engaged in virtual currency activities). The Bank of Slovenia carries out certain activities in the area of AML/CFT in conjunction with the Office for Money Laundering Prevention.

(3) Macroprudential policy: The Bank of Slovenia carries out macroprudential supervision and pursues macro-prudential policy. In the area of macroprudential supervision, the Bank of Slovenia identifies, monitors, and assesses systemic risks to financial stability, and adopts the necessary measures for the prevention and mitigation of systemic risks. In its role as the designated authority, the Bank of Slovenia is responsible for implementing Article 458 of Regulation (EU) No 575/2013 and is thus responsible for defining measures to mitigate macroprudential or systemic risks in connection with banks and for setting capital buffer requirements. The Bank of Slovenia is responsible for the development and implementation of macroprudential measures for the banking sector and leasing companies. The legal basis for the implementation of macroprudential policy is provided by the Capital Requirements Regulation (Regulation 575/2013/EU), the Banking Act (ZBan-3), and the Macroprudential Supervision of the Financial System Act (ZMbNFS; Official Gazette of Republic of Slovenia, no. 100/13).

(4) Bank resolution and deposit guarantee scheme: Under the rules implementing the EU Recovery and Resolution Directive (RRD), i.e., the Resolution and Compulsory Winding Up of Banks Act (ZRPPB-1), the Bank of Slovenia is the designated national resolution authority for banks with their seat in Slovenia. As such, it is competent for implementing bank resolution measures under ZRPPB-1 (except for the powers and tasks for which the Single Resolution Board is responsible in accordance with Regulation 806/2014/EU), including exclusive competence for deciding on measures regarding compulsory liquidation of banks.

The Bank of Slovenia is also the operator of the deposit guarantee scheme in accordance with the Deposit Guarantee Scheme Act (ZSJV), whose basic objective is to protect depositors and to maintain their confidence in the banking system. Pursuant to the ZSJV, deposits at a bank or savings bank with the head office in Slovenia are guaranteed up to the amount of EUR 100,000 EUR.

Other tasks:

The Bank of Slovenia is part of the European System of Central Banks and part of the Eurosystem, within which it implements the Eurosystem’s common monetary policy, manages official foreign reserves (joint management of the ECB’s foreign reserves), is responsible for the smooth operation of payment systems and issues euro banknotes.

The Bank of Slovenia also performs certain other tasks as part of its legal mandate, such as acting as the payment/fiscal agent of the state or as a representative of the state at international monetary organizations, managing accounts for the state, government bodies, and public-sector entities, attending to financial, monetary, banking and balance of payments statistics, and managing the central credit register. A number of the Bank of Slovenia’s tasks relate to the operation of critical national infrastructure under the Critical Infrastructure Act (ZKI).

The Bank of Slovenia is also the competent supervisory authority under Regulation 2017/2402/EU governing securitization.

  • European Central Bank (ECB)

Slovenia is part of the Eurozone and, as such, the European Central Bank has become the supervisor of Slovenian banks under the EU’s Single Supervisory Mechanism introduced by Council Regulation (EU) No 1024/2013.

The Bank of Slovenia is a member of the Single Supervisory Mechanism under which the ECB – in cooperation with the national supervisory authority – directly supervises (groups of) so-called significant credit institutions (Sis), which are deemed to be relevant to the functioning of the Eurozone banking system. In operational terms, this supervision is conducted by joint supervisory teams (JSTs). The Bank of Slovenia participates in the supervisory activities of the ECB via the JSTs, while the final supervisory decisions with regard to these banks are made by the ECB.

Other credit institutions remain to be subject to supervision by the Bank of Slovenia and will only be indirectly supervised by the ECB. Namely, the supervision of banks and savings banks that do not meet the criteria for being classed as significant institutions, i.e., less significant institutions (LSIs), is conducted by national supervisors, in accordance with national and EU legislation, having regard for the rules and methodology of the ECB and SSM. National supervisors regularly submit supervisory data for less significant institutions to the ECB and inform it of the material findings of their supervision. The ECB can, however, take over the supervision of less significant institutions in specific cases. 

The ECB is currently responsible for the direct supervision of approximately eight Slovenian banks (credit institutions) qualifying as significant institutions and representing the most important banks in the country, while the Bank of Slovenia remains competent for six banks and saving banks that are regarded as less significant banks (source: Bank of Slovenia’s website and annual report for 2021).

  • Securities Market Agency (Agencija za trg vrednostnih papirjev, ATVP)

The Securities Market Agency issues licenses and supervises the securities market. With respect to the banking sector, the Securities Market Agency plays an important role in case of takeovers. Namely, the Securities Market Agency issues takeover bid authorizations and supervises the procedural steps of takeovers. Apart from that, the Securities Market Agency is also competent for the supervision of the banks providing (ancillary) investment services.

  • Office of the Republic of Slovenia for Money Laundering Prevention (Urad Republike Slovenije za preprecevanje pranja denarja)

The Office of the Republic of Slovenia for Money Laundering Prevention performs tasks related to the prevention of money laundering and financing of terrorism. It provides an inspection of the implementation of the ZPPDFT-2.

1.3. What are the current priorities of regulators and how does the regulator engage with the banking sector?

The supervisory priorities of the Bank of Slovenia are not publicized in advance (ex-ante), therefore its priorities can be seen only from their annual reports in which the Bank of Slovenia describes its priority areas in the preceding year (ex-post), such as 2020 and 2021 (the annual report for 2022 has not yet been published). In general, it could be said that capital adequacy and credit risk management remain the top priority of the Bank of Slovenia.

In terms of banking supervision, the outbreak of the COVID-19 epidemic meant that the Bank of Slovenia’s supervisory activities in 2020 and 2021 were refocused on monitoring and assessing the banks’ ability to deal with the consequences of the epidemic in the areas in which the coronavirus pandemic could have an impact: credit risk management, capital adequacy, business model sustainability, and management. In 2020 the stress tests were postponed until 2021 and the Bank of Slovenia took a pragmatic approach to carrying out annual SREP activities in 2020, while in 2021 the Bank of Slovenia resumed the implementation of SREP in common and comprehensive scope.

After focusing on the Covid crisis for the past two years, the Bank of Slovenia has now shifted its focus on the recent high inflation levels that have been caused due to interruptions on the demand side of the supply chains. The Bank of Slovenia is also expected to follow the general priorities set by the SSM. The Bank of Slovenia focuses on the macro-financial consequences of the geopolitical tensions caused by Russia’s invasion of Ukraine and challenges stemming from banks’ digital transformation strategies or physical and transition risks from global climate change. In aiming to address these challenges the SSM set the following supervisory priorities for 2023-2025:

  • strengthening resilience to immediate macro-financial and geopolitical shocks;
  • addressing digitalization challenges and strengthening management bodies’ steering capabilities;
  • stepping up efforts in addressing climate change (Source: ECB, ECB Banking Supervision – SSM supervisory priorities for 2023-2025).

The Bank of Slovenia is proactively engaging with the banking sector, mainly through regular inspection, evaluation, and the issuance of executive decisions and recommendations. Supervisory measures are drawn up when breaches of regulations or deficiencies are identified. The more important measures imposed on banks and savings banks, members of their management bodies, and shareholders are issued in the form of the binding legal acts set out by the ZBan-3, i.e., in the form of orders and decisions.

Supervisory measures on significant banks are imposed by the ECB, whereas supervisory measures on less significant banks are imposed by the Bank of Slovenia.

The Bank of Slovenia’s supervision takes the form of (1) an ongoing supervisory review and evaluation process (SREP) on an annual basis, and (2) on-site inspections at banks.

As a part of its risk-based approach, where supervisory activities are focused on the most material risks at each bank, the Bank of Slovenia sets out specific supervisory activities for each bank, thereby responding to a change in the bank’s risk profile or to changes in the banking system.

II. AUTHORISATION

2.1. What licenses are required to provide banking services in your jurisdiction? What activities do they cover?

Banks may provide banking services, financial services, and ancillary financial services when they obtain authorization to provide those services in accordance with ZBan-3 or Regulation 1024/2013 (Banking License).

The Banking License covers the following activities:

1) acceptance of deposits and other repayable funds from the public (banking services); and

2) the following financial services:

  • granting of loans including consumer loans, mortgage loans, factoring, financing of commercial transactions, including forfeiting;
  • financial leasing (lease or rent);
  • payment services and electronic money issuance;
  • issuance and administration of other payment instruments (e.g., travelers’ cheques and bankers’ drafts);
  • issuance of guarantees and other sureties;
  • trading for own account or for the account of customers in money-market instruments, foreign legal tender, including currency exchange transactions, standardized futures and options, currency and interest-rate instruments, and transferable securities;
  • participation in securities issues and the provision of related services;
  • advice to undertakings on capital structure, industrial strategy and related questions and advice, and services in connection with mergers and acquisitions;
  • money broking on interbank markets;
  • portfolio management and related advice;
  • safekeeping of securities and other related services;
  • credit reference services;
  • leasing of safe deposit boxes;
  • investment services and activities, and ancillary investment services in accordance with the law governing the market in financial instruments.

Banks that intend to provide financial services should obtain prior authorization to provide financial and additional services referred to in Articles 5 and 6 of ZBan-3. The application for the authorization for financial services can be filed in parallel with or separate from the authorization for banking services. The ECB is competent for issuing the authorization for banking services for the banks with their seat in Slovenia, while the Bank of Slovenia is competent for issuing the authorization for financial services.

A bank that acquired authorization to provide banking services can provide additional financial services upon notification to the Bank of Slovenia.

Banks may also provide additional services, i.e., management of their own assets, controlling and operating databases (including personal data), or similar operations that support the provision of services by credit institutions.

2.2. What is the procedure for obtaining a banking license? How long does this typically take?

In order to obtain a Banking License (for the provision of banking and financial services), the applicant should submit a written application (License Application) to the Bank of Slovenia. Before the formal submission of a License Application, it is customary that the applicant will request an informal introductory meeting with the competent officials of the Bank of Slovenia to introduce the managers, present the intended business model and strategy, and generally discuss the licensing process, such as timing for the authorization process and required documentation. The formal process starts with the submission of a written License application.

The License Application should include all relevant information and documentation required for the assessment of the regulatory requirements under ZBan-3 (and other applicable regulations), such as a notarized version of the Articles of Association, description of the business model and business plan, information on shareholders with a qualified holding or information on 20 largest shareholders, information on related parties, organizational structure of the bank, written procedures for risk management, AML, conflicts of interest, internal controls, fit and proper assessment of the management and other relevant evidence proving that the bank meets the requirements under ZBan-3.

When submitting the License Application, the applicant must also ensure: (1) that the future qualifying holders submit a request for the granting of authorization to acquire a qualifying holding in the bank; and (2) that future members of the bank’s management board submit a request for the granting of an authorization to perform the function of a member of the bank’s management board.

The Bank of Slovenia may submit the License Application to regulators in other states for consultation if the respective bank is connected to or controlled by a company/bank in that state.

The Bank of Slovenia may refuse the License Application if the applicant fails to meet the organizational requirements, the standards required in the interest of sound and prudent management of the institution with respect to future qualifying holders or members of management bodies, corporate governance requirements, or conditions under Regulation 575/2013/EU. The Bank of Slovenia will also refuse the License Application if the laws of the State of the person that is closely connected to the bank would prevent the exercise of effective control over the bank. For the purpose of preventing violations of ZBan-3 or Regulation 575/2013, the Banking License may include conditions or limitations on the provision of banking services for which the authorization is being granted.

If the applicant meets the required criteria under the national law, the Bank of Slovenia will prepare a Draft Decision and forward it to the ECB for approval and notify the applicant and the ECB thereof. The Draft Decision is deemed to be approved if the ECB gives no objections within 10 days from its receipt. The due date for objections can be prolonged for another 10 days in duly justified cases. If the ECB opposes the Draft Decision, it gives a written statement in which it shall present the underlying reasons for its objection.

If the applicant has also filed an application to provide financial services or ancillary financial services in parallel with its request for the granting of authorization to provide banking services, the Bank of Slovenia shall decide on the request for the granting of authorization to provide financial and ancillary financial services until the ECB gives it decision on the provision of banking services.

ZBan-3 provides a maximum period of review in which the Bank of Slovenia must decide on the License Application. Namely, the Bank of Slovenia must issue a decision on granting the authorization to provide banking, financial, and ancillary financial services within six months of receiving the License application. Such a review period, however, only starts when the Bank of Slovenia establishes that the application and supporting documents are complete.

2.3. Can a foreign bank operate in your jurisdiction on the basis of its domestic license?

Yes, under the EU passporting regime a foreign bank established in another Member State of the European Union (the EU Member State Bank) with a banking license issued by a competent authority in that Member State (home member state regulator) may provide banking services and/or financial services, for which it holds a domestic license, in Slovenia on the basis of that domestic license. The home member state regulator has to notify the Bank of Slovenia of the intended operation of the bank in Slovenia.

The EU Member State Bank may operate in Slovenia directly by providing cross-border services or through a branch, which will be entered in the Slovenian Business Register.

The EU Member State Bank will continue to be subject to the supervision of its home member state regulator, but the Bank of Slovenia will monitor the conduct of its business and assist the home member state regulator in its supervision.

The EU passporting regime does not apply to foreign banks established in third countries, who may provide banking and financial services in Slovenia only through a branch, whereas authorization to establish a branch is required in case the bank is an entity from a third state. The authorization to establish a branch is issued by the Bank of Slovenia and includes the list of banking and financial services that can be offered by the respective branch.

2.4. What are the restrictions on ownership, including foreign ownership of banks?

Other than the request that all future qualifying holders must apply for authorization to acquire a qualifying holding (see Section 2.5.), there are no restrictions on foreign ownership of the banks in Slovenia on the level of banking regulation. Certain restrictions can nonetheless be imposed on the political level (e.g., restrictions due to sanctions against Russia). Restrictions also apply to shareholders from countries whose domestic laws would prevent the exercise of effective control over the bank. Banks with such ownership will not be able to obtain a banking license.

Potential restrictions on foreign ownership of banks can also result from the foreign direct investment screening regime. In 2020 the Act Determining the Intervention Measures to Mitigate and Remedy the Consequences of the COVID-19 Epidemic (ZIUOOPE; Official Gazette of Republic of Slovenia, no. 80/20, as amended) implemented foreign direct investment screening rules (FDI) in Slovenia. According to the ZIUOOPE, any entity from another EU Member State/third country that will acquire at least a 10% share in a Slovenian bank should notify the intended acquisition to the Ministry of Economic Development and Technology no later than 15 days from the signing of the agreement on the transfer of shares. The Ministry then carries out the screening procedure, in which they decide whether the FDI will be approved. If the FDI poses a threat to the security or public order in Slovenia, the FDI will be prohibited or canceled. In such a case, the agreement on the transfer of shares becomes null and void. However, there is no general rule as to specific countries or types of persons that could not be granted authorization. The current FDI regime applies until July 30, 2023.

2.5. What are the requirements for a proposed acquisition and acquirer of a qualified holding in a bank? Would the same requirements apply in the case of an increase of a qualifying holding?

Acquisition of a ‘qualifying holding’ in the banks requires prior approval based on the “fit and proper” assessment of the Bank of Slovenia (or the ECB, as applicable). Participation in a bank is deemed to be a “qualifying holding” when it represents 10% or more of the shares and/or voting rights in the bank or crosses other relevant thresholds (20%, 30%, or 50%). In addition, obtaining rights to appoint the (majority of) the management board or other means of providing significant influence over the management of the bank also falls within the scope of a “qualifying holding.”

The Bank of Slovenia decides on the authorization based on the criteria laid down in Article 73 of the Banking Act (suitability criteria). The criteria for the assessment of the future qualifying holders are harmonized at the EU level and aim (inter alia) to ensure that the qualifying holders:

(i) have a good reputation, whereby in this context the Bank of Slovenia takes into consideration also the reputation, knowledge, skills, and experience of all members of the management or supervisory bodies who will manage or otherwise influence the bank after the acquisition of qualifying holding,

(ii) have the necessary financial soundness that will allow the target bank to meet its prudential requirements, and

(iii) that the transaction leading to the acquisition of the qualifying holding is not financed with money derived from criminal activities nor does it increase the risk of money laundering.

In case the bank is supervised by the ECB, the Bank of Slovenia will preliminarily assess these criteria and make a Draft Decision. The notification of the qualifying holding and the Draft Decision will then be submitted to the ECB for final decision and the ECB will assess whether to approve or oppose the acquisition of the qualified holding. In case of approval, the future qualifying holder needs to acquire the qualified share (within the approved range of voting rights) within the time limit set by the authorization.

Each authorization for the acquisition of a qualified holding includes a range in the share of voting rights that may be acquired (e.g., from 10-20 %, 20% to 1/3 of voting rights, and so on). In case of an increase of a qualified holding, the qualified shareholder has to obtain a new authorization prior to acquisition. A new authorization is also required if the acquirer failed to acquire the shares within the time limit set by the authorization.

III. REGULATORY CAPITAL AND LIQUIDITY

3.1. How are banks typically funded in your jurisdiction?

Banks are normally funded through a combination of share capital supplemented by various items of tier 1 and tier 2 capital (see Section 3.2.)

3.2. What capital and own funds requirements apply to banks in your jurisdiction?

The minimum amount of a bank’s initial capital is EUR 5 million and is determined in accordance with Article 12 of Directive 2013/36/EU (CRD).

The initial capital of the bank should include one or more common equity tier 1 items referred to in points (a) to (e) of Article 26(1) of Regulation 575/2013/EU (CRR). The initial capital thus includes (a) capital instruments (subject to conditions laid down in Article 28 or, where applicable, Article 29 of Regulation 575/2013), (b) share premium accounts related to the instruments referred to in point (a), (c) retained earnings, (d) accumulated other comprehensive income and (e) other reserves.

Capital and own funds requirements in Slovene jurisdiction are laid down in the relevant provision of Regulation 575/2013/EU (CRR).

3.3. Has your jurisdiction implemented the Basel III framework? Are there any major deviations?

The EU Basel III regulatory capital framework has been implemented by the European Union by Regulation 575/2013/EU and Directive 2013/36/EU (CRD package), which respect the balance and ambition of the Basel III framework. Slovenian law follows the international standards adopted with the Basel III framework as implemented with the CRD package.

Slovenia has implemented and fully complies with the CRD IV/CRR framework, which reflects the Basel III standards. CRD Directive 2013/36/EU has been transposed into national law and CRR Regulation (EU) No 575/2013 applies directly.

IV. REPORTING, ORGANISATIONAL REQUIREMENTS, INTERNAL GOVERNANCE, AND RISK MANAGEMENT

4.1. What key reporting and disclosure requirements apply to banks in your jurisdiction?

Financial statements and auditor’s report

It is mandatory for banks to publish their annual report, together with the auditor’s report, on their official website and submit their annual financial statements and audit reports to the Agency of the Republic of Slovenia for Public Legal Records and Related Services for its publication.

General rules applicable to books of account and annual reports of the bank are included in the Companies Act (ZGD-1; Official Gazette of Republic of Slovenia, no. 65/09, as amended) and in the law governing auditing. Banks are subject to the reporting provisions applicable to large companies and are thus obliged to audit their financial statements in accordance with the ZGD-1. According to the ZGD-1, banks should follow international accounting standards when preparing their financial statements. Annual financial statements of a bank shall include:

  • The Balance sheet,
  • The Income statement,
  • The Notes to the financial statements,
  • The Cash flow statement,
  • The Statement of changes in equity,
  • The Statement of other comprehensive income, and
  • The Management report.

Members of the management body and supervisory body must jointly ensure that the annual reports, including the corporate governance statement and the statement of non-financial performance, are drawn up and published in accordance with the ZGD-1, the Slovenian accounting standards, and international accounting standards.

Banks are obliged to disclose financial information related to their financial statements to the Bank of Slovenia. A bank shall submit the following to the Bank of Slovenia within eight days of receiving the auditor’s report, but no later than four months after the end of the calendar year:

1. The annual financial statement (and consolidated financial statement if applicable);

2. The auditor’s report on the auditing of the (consolidated) annual financial statement; and

3. The additional auditor’s report on the bank’s compliance with risk management rules.

Banks must publish their annual reports together with the auditor’s report on their websites within four months of the end of the calendar year (i.e., by the end of April each year following the relevant financial period) and must keep their annual reports on their websites for a minimum of a five-year period.

Additionally, parent banks with their seat in Slovenia that control one or more subsidiaries are obliged to publish consolidated reports. The obligation to prepare consolidated financial statements applies to companies with their seat in Slovenia, which are parent companies of one or more companies (subsidiaries) if the parent company or any subsidiary is organized as a limited liability company, dual company, or another similar legal form of the same kind under the law of the home country of that subsidiary. The consolidated annual financial statement must give a true and fair view of the financial position of all the companies in the group. The consolidated annual financial statement should be published on the same day as the annual financial statement of the parent bank.

  • Other reporting obligations under the Banking Act

In addition, the banks in Slovenia have several reporting obligations under the Banking Act (ZBan-3), Regulation 575/2013/EU, and other legislation. For example, banks are required to report on payment transactions with foreign subjects, liquidity information, submit financial statements, etc. Reporting obligations apply to banks with their seat in Slovenia, which obtained a Banking License in accordance with the ZBan-3.

Banks report to the Bank of Slovenia in relation to compliance with ZBan-3. For example, banks are obliged to report on qualified holdings and significant circumstances, whereby significant circumstances means information that is to be entered into the Business Register by law, information on the summoning of the General Meeting and any resolutions adopted thereat, information on acquisition or disposal of shares, business holdings or membership rights in legal entities, information regarding ceasing to provide certain services/offer certain products and information on transactions with related parties. Significant circumstances also include information on corporate governance, own funds assessment, and other information indicating compliance or non-compliance with obligations under ZBan-3 and other rules.

Furthermore, banks report to the Bank of Slovenia regarding several requirements under CRR Regulation 575/2013/EU, e.g., on the exclusion of an entity from the scope of prudential consolidation, sub-consolidation, or payment of interim or year-end profits, etc. The Banks need to publish disclosures set out in part 8 of CRR Regulation 575/2013/EU on their official website.

The banks need to explain on their official website how they meet the requirements under applicable laws, regulations, and guidelines with regard to:

1. the bank’s internal governance arrangements and organizational structure;

2. the policy for selecting members of the management body; and

3. the remuneration policy.

Furthermore, parent banks in the Republic of Slovenia need to annually publish information on the legal and organizational structure of the banking group, including a description of the internal governance arrangements, the arrangements with regard to close links, and the arrangements regarding the governance of subsidiaries on their official website or provide reference to the equivalent information in the line of the publication of the aforementioned description.

Key procedural steps regarding the reporting are governed by the Decision on the reporting of particular facts and circumstances by banks and savings banks (Official Gazette of Republic of Slovenia, no. 115/21, as amended). The reporting is done online using a qualified electronic signature. The Decision on the reporting of particular facts and circumstances by banks and savings banks contains the prescribed reporting forms.

Banks that fail to comply with reporting obligations under the Banking Act (do not submit a report or report false information) can be fined for an offense. Fines for the said infringements range from EUR 25,000 to EUR 250,000.

  • Reporting obligations – AML

Banks also have a general obligation to report important information in accordance with the ZPPDFT-2 (please see our answer under Section 4.5.).

4.2. What are the organizational requirements for banks, including with respect to corporate governance?

The corporate governance and organizational requirements for banks are regulated by numerous regulations and recommendations. The fundamental rules referring to the corporate governance of banks are laid down in the Companies Act (ZGD-1) and the Banking Act (ZBan-3).

The Banking Act lays down basic principles and specific features of the organizational structure of banks. Banks in Slovenia can only be incorporated as joint stock companies (delniska druzba) or Societas Europaea (SE). The minimum share capital of a bank is EUR 5 million. The shares of a bank may only be issued as registered shares and may (normally) be paid up in cash only.

A bank may choose to have either a two-tier system of governance with a management board and a supervisory board or a one-tier system of governance with a board of directors. The management body of a bank should have at least two members, whereby no authorized representative of the bank (member of the management body or procurator) shall have the power to independently represent the bank with respect to all of its assets. Members of the management body and members of the supervisory board should obtain authorization from the Bank of Slovenia (as described below).

Assessment of the suitability applies to a member of the management body (management board or board of directors) and members of the supervisory board.

Members of the management body should first be approved by the supervisory board. When appointing a member of the management body, the supervisory board should issue a decision appointing a member of the management body (Decision). Such a Decision is subject to conditions related to submitting a request for a license and obtaining a license from the Bank of Slovenia. After the supervisory board gives the Decision, the candidate shall submit a request to obtain a license to the Bank of Slovenia (Request). The request shall be filed within 15 days of the Decision; otherwise, the Decision will be annulled. The Request shall include a business strategy and proof of eligibility, i.e., proof that the candidate has the knowledge, skills, and reputation needed to take up the position. As part of the evaluation process, the Bank of Slovenia may request an evaluation of the candidate from the bank or conduct an interview with the candidate. The Bank of Slovenia grants or refuses the license to a member of a management body based, depending on whether the eligibility criteria are met and whether the designation process was appropriate. The Bank of Slovenia may check if the member of the management body meets the eligibility criteria at any time during the term of office.

Appointment of members of the supervisory body is made in a similar manner. A member of the supervisory body should first be appointed by the general meeting of the bank (Decision of the General Meeting). The Decision of the General Meeting is subject to conditions related to submitting a request for a license and obtaining a license from the Bank of Slovenia. The candidate shall submit a request to obtain a license to the Bank of Slovenia (Request) within 15 days; otherwise, the Decision of the General Meeting will be annulled. The Request shall include the personal data of the candidate and proof of eligibility, i.e., proof that the candidate has the knowledge, skills, and reputation needed to take up the position. As part of the evaluation process, the Bank of Slovenia may request an evaluation of the candidate from the bank or conduct an interview with the candidate. The Bank of Slovenia grants or refuses the License based, depending on whether the eligibility criteria are met and whether the designation process was appropriate. The Bank of Slovenia may check if the member of the supervisory body meets the eligibility criteria at any time during the term of office.

In relation to banks supervised by the ECB in accordance with the rules of Regulation (EU) 1024/2013, the ECB shall decide on the granting of these licenses. The Request should be made to the Bank of Slovenia, but the procedure will be conducted in accordance with the Regulation.

4.3. What are the local rules for loans to the management body and their related parties?

The general rules on granting loans to the members of the management body are governed by the Companies Act (ZGD-1). In principle, it is permitted to grant loans to the members of the management body and their related parties subject to some limitations laid down in the Companies Act. A loan may be granted only based on a decision of the supervisory board/board of directors (hereinafter: Decision). The Decision should include all basic information on the loan (e.g., type of interest rate, repayment term, etc.). Any loans granted without the Decision shall be immediately returned to the bank unless the supervisory board/board of directors adopts a Decision afterward. The same rules apply to loans granted to family members or companies owned by the management body member. Granting a loan to a member of the management body and/or their related party should not impair the bank’s share capital and tied-up reserves. Any loan given to a member of the management body or their related party that infringes the latter shall be null and void. Loans to the member of the management board shall not be given on terms more favorable than those normally offered by the bank to other persons, except in case of objectively justified reasons.

The Banking Act (ZBan-3) provides additional rules on transactions between banks and their related parties (including members of the bank’s management body, supervisory body, and members of their close family) that should be taken into account:

  • Banks have to keep a register of their related parties and ensure that data on exposures to these persons are adequately documented. Banks are obliged to provide this information to the Bank of Slovenia or the ECB upon request;
  • Banks should set conditions and restrictions for exposures to their related parties, establish exposure monitoring and management and determine any possible exceptions to these policies;
  • Banks may not enter into transactions with related parties on terms that are more favorable than those normally offered by the bank to other parties, except where there are objective reasons for doing so, especially if the related party is being restructured. If doing so, the bank is obliged to inform the Bank of Slovenia or the ECB thereof;
  • The approval of the Supervisory Board is required for transactions with related parties: (i) if, as a result of that transaction or the aggregate value of all transactions, the bank’s total exposure to that related party, including indirect exposure, reaches or exceeds EUR 100,000, and for each subsequent transaction that increases the bank’s total exposure to that related party by a further EUR 100,000, and (ii) if the transaction with the related party is concluded on terms more favorable than those normally offered by the bank to other parties due to objective reasons;
  • Amounts of the loans given to the members of management bodies need to be disclosed in the annex to the bank’s financial statement.   

4.4. What are the main legal provisions governing risk management in the banking sector in your jurisdiction?

The main legal provisions governing risk management are laid down in the Banking Act (ZBan-3), Regulation 575/2013/EU (as amended with Regulation (EU) 2019/876), and several implementing regulations adopted by the Bank of Slovenia. Risk management is also governed by several regulatory technical standards, guidelines, etc.

Banks should take into account significant market risks when assessing and providing adequate capital. Banks must set up a specific risk management function and give it sufficient powers so that it is able to implement the tasks they have by law. The function must be separate from other functions and the function holder shall be independent and report directly to the management body. Risk management is the responsibility of the management board and the supervisory board. Banks should put in place an effective internal system to ensure that these bodies are informed of risks immediately. They should implement, inter alia, appropriate policies addressing credit, market, securitization, and liquidity risk. Banks should regularly carry out risk assessments.

The Bank of Slovenia may impose higher capital requirements on a certain bank that bears a higher level of risk in the course of its business. The Bank of Slovenia also sets requirements for the maintenance of capital buffers to prevent or limit macro-prudential and systemic risk, in accordance with ZBan-3.

4.5. What are the legal requirements applicable to banks in combating money laundering and terrorist financing area?

The ZPPDFT-2 applies to all banks established in Slovenia as well as Slovenian branches of third states banks and EU Member States banks. In order to comply with the ZPPDFT-2 banks need to carry out risk assessments, adopt internal measures to ensure the prevention of money laundering, appoint a compliance officer, keep records, etc.

Banks should also carry out customer due diligence. Customer due diligence should be conducted, inter alia, for transactions that exceed EUR 15,000, for suspicious transactions, etc. In the course of customer due diligence, banks should identify the party’s true identity as well as the identity of the beneficial owners of the party. According to the ZPPDFT-2 banks are prohibited from engaging in certain transactions that pose a risk of money laundering, e.g., banks shall not offer anonymous accounts, savings books, or safes, and shall not engage in shadow banking. The ZPPDFT-2 also restricts cash transactions between subjects (transactions exceeding EUR 5,000 shall not be made in cash). Banks are obliged to report to the AML Office on any cash transactions that exceed EUR 15,000.

Banks have a reporting obligation to the AML Office and in accordance with this reporting obligation, banks should notify the AML Office of large cash transactions, unusual transactions (e.g., transactions related to high-risk countries), and suspicious transactions. Suspicious transactions are transactions with respect to which there exists a risk that they are connected to money laundering. In order to indicate suspicious transactions banks should make a list with possible indicators that point to potential money laundering.

4.6. Are there any legal provisions regulating banking secrecy in your jurisdiction?

Yes. Bank secrecy is governed by chapter 5.5 of the Banking Act (ZBan-3). The ZBan-3 determines the meaning, use, and protection of confidential data of the clients. ZBan-3 defines confidential data as any data, facts, and circumstances about the individual client in the bank’s possession. Banks have a general obligation to protect confidential data regardless of the means by which they obtained that information. In some cases, banks are obliged to share the data with national authorities, e.g., banks shall submit the data if requested by the Bank of Slovenia or the ECB. Banks may also share confidential data with the police or prosecutor’s office when they report a crime.

V. TRENDS

5.1. What are the main trends in the banking sector in your jurisdiction?

The number of credit institutions in Slovenia has been falling in recent years and this trend will presumably continue. For several years, there has been a trend of acquisitions of smaller banks by larger ones. The concentration in the Slovenian banking system is thus gradually increasing.

The banking sector has also undergone a digitalization of its business. Digitalization is one of the main trends and goals in all Slovenian banks. The COVID-19 crisis has visibly accelerated the digitalization of the bank’s operations; there has also been a rise in mobile banking. In recent years, banks have been closing smaller premises due to the increasing use of mobile banking. It is also expected that this trend is going to continue in the following years. Banks in Slovenia are increasingly focusing on sustainable development and are focusing on addressing environmental, social, and governance challenges in this area.

Another trend in the banking sector is the expansion of the range of services offered by banks. Slovenian banks tend to offer a wider range of financial products. However, in general, Slovenian banks still offer mostly basic banking services and do not offer services beyond traditional banking.

5.2. What are the biggest challenges in the banking sector at the moment?

Slovenian banks face several structural challenges, such as:

  • finding profitable business models,
  • adapting to the technological challenges that are changing the competitive environment, and
  • successful implementation of environmental changes to maintain a presence in a changing market.

Slovenian banks will have to effectively respond to these challenges, otherwise, we cannot expect the banks to catch up and keep up with the competitors from other EU countries.

The banking sector also faces challenges due to geo-political uncertainty, the vulnerability of the economy to a possible recession, potential liquidity outflows, a deterioration in the outlook for interest rates, and regulatory and other tax measures affecting banks. Slovenian banks have managed to reduce the number of NPLs despite the COVID-19 crisis. However, due to the outbreak of the war in Ukraine, the banking sector in Slovenia again faces increased macroeconomic risk and credit risk.

5.3. What’s new in fintech?

The Bank of Slovenia has set up a special website called the Fintech Innovation Hub. The Fintech Innovation Hub enables the exchange of information related to innovative business models and provides clarification of regulatory requirements. It targets business entities planning to provide solutions based on financial technologies (fintech) and that are interested in which regulatory requirements they will need to fulfill if they provide such services in Slovenia or within the European Economic Area.

Market entities that develop innovative financial solutions based on advanced technologies may participate at the Fintech Innovation Hub and address their queries regarding regulatory requirements to the Bank of Slovenia. In order to ensure the neutral role of the Bank of Slovenia, no specific advice related to business entities’ innovative services can be provided.

According to the Bank of Slovenia, alternative methods of payment, services related to crypto assets, blockchain and DLT technologies apps, crowdfunding, regulatory technologies, etc. are the most common business models considered in its Fintech Innovation Hub. In general, companies offering cryptocurrency exchange, custody, and trading services are not regulated and do not need a license from the Bank of Slovenia to carry out these activities. There is no general law that would regulate fintech. However, certain services in the field of fintech may fall within the definition of payment services and are therefore regulated in accordance with ZPlaSSIED and the Payment Services Directive. In such cases, the fintech service providers will have to obtain authorization from the Bank of Slovenia.

Several foreign fintech companies are offering their services in Slovenia. However, there is also a rise in Slovenian fintech companies offering, inter alia, peer-to-peer financing, installment payments via platforms, etc. Slovenian banks normally offer only basic banking and financial services and are (for now) not included in offering services beyond traditional banking (fintech). These services are currently provided by other market players.

Slovenian AML Office keeps a Register of virtual currencies services providers in accordance with the ZPPDFT-2. The aim of the register is to supervise activities connected to money laundering and financing of terrorism in this sector. In December 2022, 17 companies were registered with the Register of virtual currencies services providers.

Download Guide PDF

 

Guide Contributors For Slovenia

Peter Malis

Attorney at law

peter.malis@jerovsek-malis.si

+386 31 754 438

 

Rok Jerovsek

Attorney at law

rok.jerovsek@jerovsek-malis.si

+386 41 297 195