Association of Small Shareholders of Slovenia (in Slovene: Drustvo Mali delnicarji Slovenije - Drustvo MDS) has actively participated for the past couple of months in procedures aimed at finding a solution for subordinated bonds issued by Slovenian systemic banks, with the intention of offering a ‘helping hand’ to the State as well as banks. Unfortunately, the Ministry of Finance and the Minister of Finance himself, Mr. Uros Cufer, has decided to offensively address Slovene investors as ‘interest groups’, and is also trying to persuade the Slovenian public that adoption of legislation with retroactive consequences has become a standard of the European Union (EU), regardless of the basic provisions of the Constitution of the Republic of Slovenia. Simultaneously, the Financial Minister has also passed false statements, quoting that the question of subordinated debt had been settled by the rules of the European Commission (EC). The EC has indeed passed guidelines or recommendations for Member States, but they do not represent rules with the power of Directives. The EC guidelines thus have no direct influence on the legal system of a particular EU Member States, which should be a well-known fact to the Minister.
Ljubljana (Slovenia), October 16th, 2013
Investors offensively addressed as ‘interest groups’
The Minister of Finance, Mr. Uros Cufer publicly stated: »/…/despite the turbulent reaction of some interest groups, amendment of the law will be adopted without any trouble/…/« Firstly, his statement is highly demeaning towards bonds owners which are by no means to be considered as ‘interest groups’ which strives to gain any additional benefit. We are talking about companies and private investors who regularly pay back their loans to banks, and now the banks are trying to write-off the loans that investors gave to them (a bond is nothing more than a simple form of debt or IOU, and the terms of an IOU are agreed in a contract or in the case of bonds, the brochure, issued by the bank). Those companies and private investors were literally mislead by the banks, when they decided to withdraw their deposits and loaned their money back to the banks by buying bonds, annotated as subordinated, and now banks want to write them off?!
We are also talking about insurance companies and pension funds, which, for the sake of highest investment security, invested their money and savings to Slovene banks, and now these same banks want to write those investments off. We are talking about real people, real companies and real money, lent to banks to refund it the same way as they (the banks) expect from their clients, when they give out loans.
Let us stress out one crucial fact which was unilaterally interpreted in public. On one side, there are short-term loans, long-term loans, Lombard loans, consumer loans, mortgage loans, etc. and on the other side deposits, state issued bonds, bank issued bonds and subordinated bonds. They all have a common denominator (regardless of the small print in the brochure/contract): ‘the taker of the loan’ gets a 100 % of the money and is obligated to pay it back in a 100 % (bear in mind, we deliberately left out the interests). So, the bank took our money and therefore is obligated to pay it back, if this is not possible, the bank should try to reach an agreement with the ‘lender’ or simply declare bankruptcy! Unfortunately, the Government of Slovenia wishes to interpret all this unilaterally and according to their needs, regardless to all irreparable consequences which will surely come, due to the enforcement of arbitrariness!
New nationalization of banks on the horizon!?
By adopting the Act on changes and amendments of the Banking Act, the Government of Slovenia is trying to retroactively interfere with our rights, defined by the issuers’ (banks’) brochure and consequently completely devaluate our investments, which is supposed to rehabilitate the Slovene banking sector. This is by definition a form of nationalization, even though demands of international institutions concerning ownership of banks are the exact opposite.
If the Government of Slovenia is interfering with our Constitutional rights in the field of financial instruments, it can also be expected that the same is going to be done with ordinary bonds and classic bank deposits. We ask ourselves with great concern if our bank deposits in Slovenian banks are still safe? Listening to the Minister of Finance, a clear yes is sadly far from reality.
Constitutional judgment can’t be questionable only in the »Banana Republic/Union«
Respected Minister, Mr. Uros Cufer: the Republic of Slovenia is based on the rule of law, and retroactive interference is not possible, because of Article 155 of the Constitution of the Republic of Slovenia which defines the following: »Acts, other laws and general legal files cannot have retroactive effect. Only the Act can define that some provisions can have retroactive effect, if it is demanded by the public benefit and does not interfere into obtained rights. «
Expropriation of citizens, Slovenian pension funds, Slovenian insurance companies and firms surely is not in the publics’ benefit! It is also worth noting that owners of bonds gained their rights based on the brochures issued by banks, making the relationship bank v. bond owner a contractual relationship.
Are ordinary bank deposits even safe?
According to the statement, given by the Minister of Finance for the daily newspaper Finance, all unsecured savers are next in the firing line. Association of Small Shareholders of Slovenia (Drustvo MDS) would like to know, what kind of savers the Minister of Finance has in mind? Does the Government of Slovenia want to let us know, that security can be a very relative issue, and what was safe yesterday according to the opinion of the Slovenian Central Bank, is not necessary safe today and tomorrow, or possibly the new Act for expropriation of bank deposits of citizens will be adopted.
Will the Slovenian Parliament stop the adoption of the Banking Act, and prevent the dissolution of the banking system and flight of capital?
Association of Small Shareholders of Slovenia (Drustvo MDS) is disappointed due to the unilateral steps which, if adopted, will bring irreparable damage. We offered a helping hand to the Slovenian Government, prepared concrete solutions and proposals where bond owners would share part of the burden. All this was made in goodwill, since bonds brochures have been made perfectly clear and no law, Minister or the EU has the power to annul them.
If the agreement is reached, no party is generally completely satisfied, but an agreement would bring back the peace we all need, the survival of all players and most importantly, additional upholding of confidence in the Slovene banking system. Sadly, the Slovenian Government opted for an ignoring approach by triggering a new ‘nationalization’ of banks and investors will have no choice but to use all other disposable means for securing their investments.
Our assessment is that appropriate decision levels are not aware of the wider macroeconomic consequences of such devaluation and the lack of argumentation while negotiating with the EC. At this point we openly announce that all available legal actions will be taken for the protection of our interests. What we want to do now is to at least inform the public and the clients of Slovene banks about the seriousness of the problem.
Can banks, which are not owned by the Republic of Slovenia, expect enormous inflow of deposits?
We appeal to all Members of the Slovenian Parliament before deciding on their vote, to once more check the proposed Banking Act. Especially in terms of sustainability of references made by the Slovenian Government, which are, in our opinion, based only on general assessments made by officials from the Ministry of Finance, who obviously forgot the wider macroeconomic aspect of such decision and subsequently represent a threat to ratings; many subjects on capital markets, will solve this by moving their deposits from ‘safe’ Slovenian banks to foreign ones, that might be more ‘dangerous’ but without the loss of ratings and business.
According to our rough assessment, the indirect negative effects should amount to around 1 to 2 billion EUR (just from allocation of funds as previously described). The estimation, made by the Ministry of Finance that allocation would amount to 300 to 500 million EUR is once again lacking any serious arguments, as it does not include indirect negative effects.
Confirmation for our assessment can also be found in the conclusions, made on last Friday’s meeting at the Slovenian Central Bank. One particular institutional investor presented his total loss because of the fall of ratings and necessary domestic investments, which well exceeded the total amount of issued hybrid and subordinated bonds from all three systemic business banks.
Will the Slovenian Government rehabilitate Slovenian banks or send them into supervised liquidation or bankruptcy?
Planned nationalization subsequently means investors will be forced to find a new, more reliable bank, which could be the beginning of a burial of Slovene banking system. We sincerely believe, no one wants this to happen. We also believe that nobody at the EU level has the intention for such action, so the Association of Small Shareholders of Slovenia (Drustvo MDS) openly addresses a protest note to Mr. Jeroen Dijsselboem and other important institutions and bodies, including the EC, which the Minister of Finance refers to (as the ones’ that gave the order that he has to follow). Association of Small Shareholders of Slovenia (Drustvo MDS) would also like to request an urgent meeting with Mr. Jeroen Dijsselboem, where investors can present the gravity of the situation, as it appears that the Minister of Finance is either ill-equipped or intentionally does not want to grasp real consequences.
An Appeal to the Minister of Finance
Association of Small Shareholders of Slovenia (Drustvo MDS) also appeals the Minister of Finance Mr. Uros Cufer, to publicly decide which interests he is supporting in the Slovenian Government: the Slovenian citizens or somebody else’s interests. The Minister easily states that Slovenia accepted the dictate of a couple of European officials (who made only RECCOMENDATIONS for Member States) and intends to expropriate:
- 902 Slovenian citizens who invested in NLB26 bond and were apparently misled by bank clerks with untying of their bank deposits in the same bank, where the Minister himself was employed,
- Mr. Primoz Kozmus, the winner of the Olympic gold medal for Slovenia, who trusted the ABVIP bond and Slovenian Central Bank’s sound appraisals on excellence of the bank – issuer of that bond as the best Slovenian bank,
- pension funds and indirectly all those who save money for a safe pension and better retirement,
- all insurance companies and other subjects of the financial industry – all for the PUBLIC BENEFIT!?
Dear Minister, if you truly believe in all of the above, we suggest you immediately resign as the Minister of Finance.