Slovenia central bank will fight covering losses from 2013 bank rescue

LJUBLJANA, Oct 16 (Reuters) - The Bank of Slovenia said on Wednesday it would mount a legal challenge if parliament passed a law requiring it to cover all possible repayments to those who lost their investments when the government propped up tottering banks in 2013.

Jurij Zitko, the head of the legal department of the bank, urged the government and parliament to change the proposed law, saying the appeal would most likely significantly delay enforcing the law and hence repaying the bondholders and share holders.

“The Bank of Slovenia does not oppose its responsibility for possible damages that would emerge due to the Bank of Slovenia actions. But it is not possible to lay damage repayments on the Bank of Slovenia regardless of its guilt,” Zitko told reporters.

The central bank said it would appeal to the Constitutional Court if parliament passed the law, which it was expected to do next week.

The proposed law was prepared by the finance ministry, which told Reuters it would not change the proposal. The ministry said the legislation was in line with a 2016 Constitutional Court ruling that urged the parliament to give greater legal protection to investors who lost assets during a 2013 bank rescue.

In 2013, the government had to pour more than 3 billion euros ($3.31 billion) into mostly state-owned banks to keep them from collapsing under the burden of bad loans. The effort also helped Slovenia avoid an international bailout.

The rescue was led by the Bank of Slovenia in cooperation with the government, the European Commission and the European Central Bank. However, it meant some 600 million euros of subordinated bonds issued by the banks were scrapped as well as bank shares held by some 100,000 investors.

Many of the investors who held those bonds and shares are now suing the banks and the central bank to get their money back.

$1 = 0.9058 euros Reporting By Marja Novak, editing by Larry King