NCEffective Insolvency and Creditor Rights Systems
The 2004 report by R. Harmer and N. Cooper prepared for the European Bank for Reconstruction and Development (EBRD) found the content of Slovenia's insolvency law to be deficient in many areas and assigned an overall rating of "Low Compliance" with international standards in the area of insolvency, including the Principles and Guidelines for Effective Insolvency and Creditor Rights Systems as set out by the World Bank. A 2006 EBRD assessment of Slovenia's commercial laws gave Slovenia's insolvency legislation a somewhat better evaluation than Harmer and Cooper. It should be noted that Harmer and Cooper looked only at the content of the law, whereas the EBRD 2006 report also took into account the effectiveness of the system in practice. The 2006 assessment gave the Slovenian system relatively high marks for efficiency, speed, and transparency/predictability in terms of both creditor and debtor initiated processes. Nonetheless, reform was deemed necessary, and in 2007 the Slovenian National Assembly passed a new Insolvency Law to replace the previous legislation. A 2008 article by Miodrag Dordevic, a Justice on the Slovenian Supreme Court, evaluated the provisions of the new law and found that the new law incorporates requirements consistent with insolvency legislation and directives promulgated by the European Community, as well as the principles promulgated in the United Nations Commission on International Trade Law (UNCITRAL) and embodied in the UNCITRAL Model Law on Cross-Border Insolvency. The law was also found to render the process more objective and predictable. However, there is insufficient information as to whether the adoption of the new law has changed Slovenia's compliance with World Bank principles.
Read More
NCInternational Financial Reporting Standards
In 2004, the World Bank published a Report on the Observance of Standards and Codes (ROSC) on Accounting and Auditing in Slovenia which recommended, among other issues, that public interest entities adopt International Financial Reporting Standards (IFRSs). In line with the European Commission (EC) Regulation No 1606/2002, Slovenia requires IFRSs in the consolidated accounts of listed companies. Moreover, Slovenia opted to permit but not require listed companies to use IFRSs in their annual accounts. Slovenia also permits the use of IFRSs in the annual and consolidated accounts of all types of companies which decide to use IFRSs for at least five years. Further, banks and insurance companies are required to use IFRSs in their annual and consolidated accounts. All other companies apply Slovenian Accounting Standards (SASs) which, according to the 2004 ROSC, fundamentally differed from IFRSs in a number of areas. In December 2005, Slovenia promulgated a revised set of SASs with effective date January 1, 2006. According to a 2006 presentation by Meta Duhovnik of the Slovenian Institute of Auditors (SIA), SASs are a simplified version of IFRSs suited for the needs of the Small and Medium-size Enterprises (SMEs) and are basically in line with the Fourth EU Company Law Directive. SASs cover a wider scope of activities than IFRSs and also provide internal accounting guidelines.
Read More
ENPrinciples of Corporate Governance
In the 2004 World Bank ROSC, the corporate governance framework in Slovenia was found to be strong when assessed against the Organization for Economic Cooperation and Development (OECD) Principles of Corporate Governance. Slovenia's legislation complied with European Union (EU) Directives, and its corporate governance legal and regulatory framework was comparable to that of many EU member states. However, the 2004 ROSC identified several areas where changes to the laws would increase compliance with the OECD guidelines. Particularly, the enforcement of corporate governance rules remained a key challenge. The European Bank for Reconstruction and Development's (EBRD) 2004 Corporate Governance Sector Assessment confirmed the World Bank's findings, as reported in the EBRD's 2006 Commercial Laws report. Overall, the EBRD assigned "medium compliance" to Slovenia, and pointed to major weaknesses with respect to disclosure and transparency, and the role of stakeholders. The Corporate Governance Code was adopted in March 2004, based on the comply or explain principle. The new Slovenian Companies Act entered into force on May 4, 2006, replacing the 1993 Companies Act. According to a 2006 article by Bruckmueller & Repolusk, published in the International Financial Law Review, the new Companies Act fully harmonizes Slovenian company law with the EU "acquis communautaire."
Read More
ENInternational Standards on Auditing
The World Bank in 2004 noted that the Companies Act of 2006 is the primary law that governs business entities in Slovenia and mandates statutory audits only for public interest entities, including large-and medium-sized joint-stock companies, large limited companies, and listed enterprises. Banks and insurance companies are considered to be large enterprises. Further, since 2001, the Slovenian Auditing Act requires that auditors apply International Standards on Auditing (ISAs) in conducting statutory audits. This requirement is in line with the Directive 2006/43/EC of the European Parliament and Council, which requires all statutory audits of annual and consolidated accounts in the European Union member states be carried out on the basis of ISAs as adopted by the European Commission. According to the information provided on the European Commission website, Slovenia has fully transposed the above-mentioned Directive into its national legislation. The Slovenian Institute of Auditors (SIA), which adopts and publishes accounting and auditing standards in Slovenia, is responsible for the translation of ISAs and, according to its 2005 self-assessment, uses a translation process, which is in line with the requirements of the International Federation of Accountants' (IFAC). In a subsequent self-assessment published in 2007, the SIA points out, however, that the translation is a continuous process and that due to frequent changes of the international standards, there is a delay in the adoption of the latest pronouncements. The 2007 assessment noted that Slovenia applies the IFAC Code of Ethics for Professional Accountants.
Read More
ENAnti-Money Laundering/Combating Terrorist Financing Standard
In their 2005 report on Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) in Slovenia, the Council of Europe's Select Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL) concluded that the 2002 Law on Prevention of Money Laundering largely complies with international standards and covers all relevant aspects with respect to organizations (financial institutions) and designated non-financial businesses and professions. Terrorist financing is a separate criminal offense in Slovenia, according to the report, and the provisions on terrorist financing in Slovenia meet the requirements of the 1999 United Nations Convention on the Suppression of Terrorist Financing. The report also mentions that the Office for Money Laundering Prevention, the Slovenian Financial Intelligence Unit (a constituent body within the Ministry of Finance) is operationally independent. The report, however, mentioned that the suspicious transaction reporting requirements in Slovenia are wanting as they do not cover terrorist financing as required by the Financial Action Task Force (FATF). In 2006, the MONEYVAL published a progress report on Slovenia's efforts to implement their 2005 recommendations. The progress report points out that a new AML/CFT Law was being drafted that would not only transpose the third European Union Directive but also better meet the latest, revised version of the international standards on AML/CFT and bring Slovenia closer to compliance with many FATF recommendations, especially those pertaining to terrorism financing. The law (Prevention of Money Laundering and Terrorist Financing Act) came into force in 2007, and owing to its relative newness, it has yet to be assessed against the FATF requirements. However, the general perception is that this Law is an improvement over its predecessor.
Read More
CPCore Principles for Systemically Important Payment Systems
Since the 2001 IMF assessment of payment systems in Slovenia, the payment system architecture in the country has drastically changed. The IMF in its 2001 study assessed the then prevailing real time gross settlement (RTGS) system, Slovenian Inter-Bank Payment System (which ceased to exist on December 31, 2006) and the Giro Clearing system (which after 2003 has not be classified as a systemically important payment system, SIPS). Starting on January 1 2007, the German RTGS system, RTGSplus, became the large value payment system in the country owing to Slovenia's adoption of the euro. The RTGplus was assessed by the IMF in 2003 and the European Central Bank (ECB) in 2004, and both reports concluded that the system, in general, observed the Committee on Payment and Settlement Systems' (CPSS) Core Principles for Systemically Important Payment System (CPSIPS). RTGSplus was a component of the Trans-European Automated Real-time Gross Settlement Express Transfer (TARGET) system, the euro area payment system. After November 19 2007, Germany and Slovenia joined TARGET2, the successor to TARGET and consequently RTGSplus was discontinued in both countries. TARGET2 provides harmonized payment services under a single shared platform across its member countries. In its 2002 report on TARGET2, the ECB indicated that the system was expected to fully comply with the CPSIPS. Further, per a 2005 report by the Bundesbank, TARGET2 is expected to maintain and improve upon the functioning of the TARGET and RTGSplus systems. However apart from these statements, there is no publicly available assessment on TARGET2's compliance with the CPSIPS. Despite the lack of information on TARGET2, it is generally believed that the system is an improvement over its predecessor and its component systems. Therefore the overall level of compliance assigned to the German RTGSplus by past assessments is maintained until TARGET2 is fully implemented in all its member countries and assessed against the CPSIPS.
Read More
