Bank recapitalization and the bail-in legal battle

By 2013, the non-performing loans accumulated during Slovenia's credit boom had grown severe enough that speculation mounted over whether the country would need a full Troika bailout like Cyprus had just received. Instead, a comprehensive asset-quality review and stress test late in 2013 became the basis for a domestically financed rescue: eight banks received capital increases, non-performing loans were transferred to a dedicated bank asset management company, two small banks were wound down, and state-owned NKBM was put on a path to privatization. Banka Slovenije estimates the total rehabilitation cost at around 8-10% of GDP, of which bail-in of subordinated bonds and hybrid instruments accounted for roughly 2 percentage points, sparing taxpayers a larger share of the bill but imposing losses directly on bondholders. That bail-in decision proved legally contentious for years afterward: shareholder associations challenged it in domestic courts, with one case escalating to the European Court of Justice over whether subordinated-instrument holders should have been wiped out at all, and Slovenia's parliament only settled compensation arrangements for some affected holders in 2019, six years after the original resolution.