Hot topics

Slovenia Business Week no. 21: Slovenian Bank System Stable, Report Finds

An annual report on financial stability in Slovenia has found that the banking system in the country is stable

An annual report on financial stability in Slovenia has found that the banking system in the country is stable. "There has been little change in stability compared to 2004," the report compiled by the central bank says.

The Bank of Slovenia finds that there has been a rise in interest rate and loan risks but that foreign exchange risk has fallen, Bozo Jasovic of the bank's board of governors told the press on Tuesday, 23 May.

Asked about the risk that the withdrawal of Belgian banking group KBC from Slovenia's largest bank, NLB, would have for the system, Jasovic said that the central bank understands that KBC was not withdrawing but changing its ownership role.

"Theoretically there could be a risk of weakened corporate management but there is no indication of this, which is why we don't expect financial stability to be impacted," he said.

Deputy Governor of the Bank of Slovenia Samo Nucic stressed that NLB would need fresh capital. "The owners must be aware of this," Nucic said, adding that there was "sufficient potential in Slovenia" to provide the capital.

However, given that Slovenia's second-largest bank, NKBM, is in the midst of privatisation and that the government wants domestic investors to participate, there is a question whether there is enough potential at home for both NLB and NKBM, Nucic pointed out.

Meanwhile, Jasovic said that the report on financial stability for 2006 shows that the rise in loans is a result of favourable economic conditions.

The profitability of banks increased despite falling margins, while there was also an increase in the exposure of the banking sector to foreign factors, Jasovic told the press.

According to Jasovic, interest-related risks to banks were on the rise last year, although exchange rate risks fell because of Slovenian efforts to join the euro.

Jasovic warned that banks have started to lower their credit rating standards in the face of growing competition, low interest rates and favourable economic conditions.

Meanwhile, Nucic said that the bank found almost no wrongdoing in the banking sector last year. The central bank last year carried out 68 regular and 18 additional checks in 22 banks operating in Slovenia, Nucic added.

The majority of the shortcomings were related to information systems, although subsequent checks found that the situation had been rectified.

Source: Slovene Press Agency STA

Author: STA