Current issues in banking

According to the assessment of the Bank of Slovenia, the economic situation in Slovenia is currently favourable and the banking system is stable, without any major risks to be flagged on a short-term basis. The only potential macroeconomic imbalance that can currently be discerned is rapid growth in residential real estate prices. Nevertheless, there are indices one should bear in mind. On the macroeconomic level, the international environment is becoming increasingly unpredictable, which – in the event of a material and long-lasting shock – could affect the Slovenian economy, as it is largely dependent on international trade, especially as the government does not have much manoeuvring room for a more pronounced counter-cyclical policy. Banks in Slovenia are now more resilient to potential shocks – they are well capitalised and have favourable liquidity position (in broader sense), and their loan portfolio has improved significantly in the last couple of years. Banks are now significantly less exposed to corporates than a decade ago, having shifted the focus of their business models more towards household lending. However, challenges remain. Banks are constantly under the pressure of technological changes, which in recent years has been a driver of market dynamics. At the same time, the regulatory framework has expanded evidently as a result of the last financial crisis. At this point, banks have a unique and perhaps final opportunity to take proper actions to ensure their viability over the long term.