(Bloomberg) -- Slovenian lawmakers pushed forward with a bill aimed at protecting investors who lost money during a 2013 bank rescue, ignoring a warning from the European Central Bank that it breaks euro-area rules.
The law is at the center of a criminal probe and demands by investors who have accused Slovenia's central bank of wrongly causing them losses when the 3.2 billion euro ($3.6 billion) lifeline was extended to the country's financial industry.
Lawmakers approved the draft in the first of three readings Tuesday. While they said that it requires some changes, the assembly agreed that the central bank should be responsible for paying compensation if courts rule in favor of investors who have incurred losses during the rescue, a so-called "bail-in". The ECB and central bank say it is the government that should pay.
"There are severe concerns about the credibility of the bail-in regime, as well as central bank independence," Markus Ferber, a German member of European Parliament, wrote in an email. Ferber made the comment after he expressed his concerns in a letter to European Commission Vice-President Valdis Dombrovskis.
While Slovenia, a nation of 2 million people, is one of the smallest EU members, the draft law may have far reaching consequences for the euro area.
If approved, it could set a precedent that may undermine countries' efforts to make investors share the burden of financial-sector rescues. It also risks depleting the central bank reserves of euro-area members, thereby having implications for the single-currency zone as a whole.
The banking rescue, which was approved by the European Commission and the ECB, wrote off 963 million euros in bonds and stocks of Slovenia's state-owned lenders so that investors would share some of the burden with taxpayers, who footed the rest of the bill.