Slovenian Financial System Remains Stable Amid Economic Uncertainty, Says Banka Slovenije
Ljubljana, Slovenia - A Report by Banka Slovenije Highlights the Resilience of the Banking System Despite Ongoing Economic Challenges
Despite the anticipated downturn in the economy and persistent high inflation, the financial system in Slovenia has remained stable this year, according to a recent report by Banka Slovenije. The report highlights that while systemic risks to financial stability have been elevated due to ongoing Russian military aggression against Ukraine and its accompanying effects, the banking system’s resilience remains robust.
Systemic Risks
Banka Slovenije identifies four key systemic risks:
- Macroeconomic risk: Elevated due to the deteriorating macroeconomic outlook and high inflation
- Credit risk: Elevated despite improved indicators of credit portfolio quality
- Real estate market risks: Prices continuing to surge, housing lending increasing, and interest rate risk growing
- Interest rate risk: Banks’ exposure to fixed-rate long-term housing loans grows
Measures to Address Risks
In response to these risks, Banka Slovenije is implementing measures to address macroeconomic risks:
- Adjustments to its macroprudential policy framework
- Working with the European Central Bank (ECB) to normalise monetary policy and prevent inflation expectations from extending over the medium term
Banking System Resilience
The report notes that the resilience of the banking system is assessed as: + Medium in the solvency and profitability segment, indicating some vulnerability to economic shocks + High in the liquidity segment, suggesting that banks are well-equipped to absorb potential losses
Cooperation with EU Member States
Banka Slovenije is also working with other EU member states to strengthen capital buffers and increase the resilience of the banking system. The bank’s governor emphasized the importance of cooperation between monetary and fiscal policy makers to address the challenges facing the economy.
Full Report Available
The full report can be found in the latest issue of the Financial Stability Review.