Slovenia's state council on Wednesday sent back to parliament the "bad bank" bill approved last week saying it was constitutionally questionable and could cause great damage to the eurozone country's budget.
"The bill is bad and unclear, it transfers the consequences of bad (loans) decisions taken by banks to tax payers," Marijan Klemenc, a council member, said when calling for a veto on the bad banks' bill.
The veto was backed by 19 councillors of the 40-seat advisory body while 14 voted against it.
When the state council sends a bill back to parliament for a new vote, the bill has to be approved by an absolute majority.
Slovenia's 90-seat parliament approved last week with 47 votes the creation of a "bad bank" to take non-performing loans from the eurozone country's indebted state-owned banks in exchange for state-guaranteed bonds.
The bill sees the creation of a bank asset management company that will buy non-performing loans from banks and clean their balance sheets with state-guaranteed bonds for a value of up to four billion euros ($5.1 billion).
When presenting the bill, Finance Minister Janez Sustersic said the government estimated the country's banks had up to six billion euros worth of non-performing loans.
In August, the main credit rating agencies downgraded Slovenia's rating over the poor state of its banking sector, causing government bond yields to rise above 7.0 percent, a level seen as unsustainable in the long term.
An International Monetary Fund mission to Slovenia on Tuesday urged the government to carry out the necessary reforms and backed the adoption of the banking bill, saying it would be an "important first step to address the buildup of non-performing loans."