12.6.3.2 Write-down

A full write-down of subordinated debt occurred in the bank State aid cases that were assessed on the basis of the 2013 Banking Communication. This Communication requires full burden-sharing by shareholders and subordinated debt holders.1 With respect to the subordinated debt holders, the 2013 Banking Communication stipulates that the liability management exercises should in principle be 100% capital generating (in case of a capital shortfall which cannot be overcome in full).2

This type of burden-sharing can be illustrated by the cases of the following five Slovenian banks: Nova Ljubljanska banka (NLB), Nova Kreditna Banka Maribor (NKBM), Abanka, Probanka and Factor Banka.3 With respect to these banks, the Bank of Slovenia adopted on 18 December 2013 a decision on extraordinary measures.4 Pursuant to this decision, these banks were required to write down all of the qualified liabilities. For instance, NKBM’s subordinated financial instruments (totalling EUR 89.540.000) were written down; this led to an increase of NKBM’s income by the same amount.5 In its decision on NKBM, the Commission noted that “the State capital injections will only be implemented after the complete implementation of the wipe-out of the subordinated debt holders. That sequence ensures that all existing subordinated debt holders have to fully contribute to the restructuring costs of the bank prior to the State stepping in”.6