12.01.2010

Banking sector

The Slovenian banking sector consists of twenty banks, three savings banks and three branches of Member State banks (as at 30 November 2009, source: BoS). Nova Ljubljanska banka (NLB) remains the largest bank. The two largest shareholders are the Republic of Slovenia and the Belgian KBC whose stake has been on the selling block for almost two years. The Spanish Santander is yet another bidder for KBC’s stake in NLB as the plans for its recapitalisation are being made.

 

The second largest Slovenian bank – Nova Kreditna banka Maribor (NKBM) – shares the destiny of other credit institutions worldwide and the recent bond issue should help improve its capital adequacy ratio and provide cash to be passed on through loans to its customers. The combined market share of NLB and NKBM by total assets was 40.6% (31 September 2009), with Abanka Vipa on the 3rd place with a 9% market share. NLB’s share in total lending of 28.3% dwarfs a 9.3% share of NKBM (30 September 2009) and the picture remains the same when the banks’ capacity to gather deposits is measured: 31.5% and 9.9% for NLB and NKBM respectively. With net profit of 49.3 million euro (30 September 2009), NLB accounted for a hefty third of the aggregate profit generated by the Slovenian banking sector.

 

 

Business banks in Slovenia:

  

As long as the country’s economy was growing, the banks operating in Slovenia tapped cross-border sources of funding to meet both retail and corporate demand for credit. Between 2005 and 2008, the percentage of loans funded by customer deposits fell from 99% to 62%. As the financial crises spilled over from the US to Europe, cross-border financing started to dry up and the Slovenian banks repaid €3.3 billion net to creditors abroad in the first 10 months of 2009. In addition, asset impairment costs and assets set aside to cushion potential losses increased axing banks’ profits before taxation by 40% for the period ended 31 October 2009 and the outlook for 2010 remains bleak. There are more counterparties unable to meet obligations and more nonperforming assets, there is an ever-increasing number of downgraded bank customers and more assets are impaired for losses but lending to creditworthy borrowers must continue. Construction, transportation and warehousing are highly leveraged and the situation has been made worse by the stall real estate market. In response to higher credit risk, credit institutions are now asking for more collateral and charging higher risk premiums alongside impairment and provisioning costs passed on to borrowers. The cost of risk in the Slovenian banking system was 1.13% at the end of October 2009.

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Regulation tried to measure and control risk through banks’ internal risk models and through related capital adequacy requirements that assume such measured risk to be a function of each individual bank’s sum resources.

 

Interest rate risk does not loom high since banks are now granting mostly short-term financing at a fixed rate of interest and short-term deposits government are rising. Foreign exchange risk and liquidity risk remain low.

Overall, the banking system is sound with the capital adequacy ratio averaging 11.6% and Tier I capital ratio averaging 9.3%. With some 30% excess capital above capital requirements, the risk absorption capacity of the Slovenian banking system remains comparatively high.

 

2010 is expected to step up credit risk, dent earnings and demand appropriate allocation of risk. The banking sector consolidation beyond Slovenia’s borders may be expected as a reaction to the higher cost of money and bigger differences in the structure of financing, which translates into stronger pressures to streamline operations. (Source: Stabilnost slovesnkega bančnega sistema/Stability of the Slovenian Banking System, BS, November 2009)

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LOANS (as at 31 October 2009)

 

Total lending was 35.3 billion euro or 799 million euros more than as at 31 December 2008. Corporate loans and retail loans rose 372 and 427 million euro respectively.

 

Average lending rate in October 2009 was 4.1%.

 

 

DEPOSITS (as at 31 October 2009)

 

Total deposits amounted to 23.7 billion at the end of October 2009 or 3.1 billion euro more than as at 31 December 2008. Deposits placed by corporate and institutional depositors increased by 2.7 billion euro and retail deposits rose 387 million euro in comparison with end-2008.

 

Average deposit rate in October 2009 was 1.8%.

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New Payment Services and Systems Act

The entry into force of the new Payment Services and Systems Act (ZPlaSS) from 1 November 2009 will alter the organisation of the transaction account register. In accordance with the ZPlaSS, the Agency for Public Legal Records and Services (AJPES) will assume responsibility for the register from 1 July 2010, while in the interim (1 November 2009 to 1 July 2010) it will continue to be administered by the Bank of Slovenia, with the provisions of Article 10 of the ZPlaSS applying mutatis mutandis during that period.

 

Access to data from the register will not change for users who are not payment service providers. Data from the register, except the data on transaction accounts of individuals (that is classified as personal data), will be public and accessible until 1 July 2010 on the Bank of Slovenia website, while individuals’  data will only be accessible to persons or entities for whom a specific law defines a legal basis for access and grounds for processing such data.

 

The changes that affect register users relate to the data set that will be processed within the register.

 

In accordance with the ZPlaSS only data on open accounts will be kept in the register, with data on closed account being deleted on the day of closure and transferred to the register archive. Register users will therefore only be able to access data on open accounts, and not on closed accounts. The opening date of transaction accounts will also be included in the register.

 

The ZPlaSS also introduced joint accounts, i.e. accounts held by two or more natural or legal persons. Data on joined accounts will be available in the register.

Payment systems comprise instruments, procedures, rules and infrastructure for transmitting information and funds transfer and are crucial to the functioning of the economy. There are two types of payment system: the systems for the interbank settlement of large-value payments (operated by the central bank and functioning in real time), and the systems for the interbank settlement of retail payments (settlement accounts of the system members (settled on a gross basis (each payment separately) within a few minutes ( real-time gross settlement systems). Payments from monetary operations, monetary claims and liabilities within the securities settlement systems, members’ claims and liabilities from participation in other payment systems, transfers of liquidity funds (e.g. interbank lending) and urgent payments by customers are all settled in these systems.

 

The second type serves for settling large-volume retail payments, namely payments for individuals and companies by means of credit orders, card-based payments, direct debit payment services, etc. The resulting settlement of interbank claims and liabilities can be made on a net or gross basis.

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SEPA

In netting systems payments between members are not settled individually, but rather banks’ claims and liabilities are calculated at a specific time during the day, and are settled by banks in the real-time gross settlement system in which the banks hold open accounts.

 

The systems that operate in Slovenia are the TARGET2-Slovenija system, which operates on the single shared platform of the TARGET2 system, and in formal legal terms is a system controlled and operated by the Bank of Slovenia, and intended primarily for the settlement of large-value payments and time-critical payments in euros; the single entry point (SVT), which allows banks and savings banks to participate indirectly in the STEP2 XCT system operated by the firm EBA Clearing, which facilitates the processing of cross-border payments of up to EUR 50,000 and is intended for the processing of mass payments that can be processed entirely automatically; the SEPA external credit transfers (SEPA ECT) system, which is operated by the firm Bankart d.o.o. to allow Slovenian banks and savings banks to participate indirectly in the STEP2 SCT system operated by EBA Clearing, and is designed for the processing of SEPA credit transfers with no limit on payment value; and the SEPA internal credit transfers (SEPA ICT) system, which is a multilateral netting payment system operated by Bankart to allow the execution of internal SEPA credit transfers (SEPA credit transfers where both the originator bank and the beneficiary bank are members of the SEPA ICP system).

 

The supplementary payment infrastructure in Slovenia comprises systems for the interbank settlement of retail payments arising from card-based payments and cash withdrawals at bank ATMs (the Card Payment Clearing and ATM Clearing card-based payment systems operated by Bankart, the Card-based payment system Activa operated by Banka Koper, and the MasterCard Clearing system operated by the international institution MasterCard International), and the Processing Centre operated by Bankart, which was established by banks and savings banks in the Bank Association of Slovenia for the purpose of standardising and rationalising procedures for transacting in new payment instruments (special payment orders, special paper-based debit orders, direct debits, direct credits and standing orders).

 

In 2002 the largest European banks approved a strategy for creating the SEPA, committed themselves clearly to this target, and adopted a general strategy to meet the objectives of the SEPA by 2010. They also reached a consensus over governance structures, with the European Payments Council  (the EPC) as the central decision-making body. The Bank Association of Slovenia has been a member of the EPC since 2004.

 

 

Further information:

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