Bank of Slovenia says cannot pay damages over 2013 rescue

LJUBLJANA, March 4 (Reuters) - The Bank of Slovenia said on Monday it is not liable to pay damages in any court case arising from the overhaul in 2013 of the banking system, arguing that it would contraven European Union rules on state aid.

The head of the bank’s legal sector Jurij Zitko told a news conference on Monday that paying damages would be against “the legislation of the European Union and of ... Slovenia.”

The finance ministry has proposed that any damages relating to the banking sector rescue should be paid by the central bank.

In 2013 the government had to pour more than 3 billion euros ($3.40 billion) into mostly state-owned local banks to prevent them from collapsing under a large amount of bad loans. In that way Slovenia also narrowly avoided an international bailout.

In the process, which was led by the Bank in Slovenia in coordination with the government, the European Commission and the European Central Bank, some 600 million euros of subordinated bonds issued by the banks in trouble were scrapped as well as bank shares held by some 100,000 investors.

The rescued banks were nationalised.

Many former subordinated bond holders and shareholders are now suing the banks and the central bank to get their money back, claiming the shares and bonds should not have been scrapped. So far no ruling has been finalised.

In 2016 the Constitutional Court ruled that parliament has to change legislation to give greater legal protection to holders of scrapped bank bonds and shares which prompted the ministry to draft the proposal.

“Saving the banks is primarily a duty of bank owners and then of the state... The central bank cannot solve the problems of the state,” Zitko said.

He said any possible damages should most probably be paid by the state.

The finance ministry was not immediately available for a comment. ($1 = 0.8823 euros) (Reporting by Marja Novak, editing by Louise Heavens)