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Business news in Slovenia

Banking system remains stable, cyber risk increased

Ljubljana, 06 May (STA) - The banking and the entire financial system in Slovenia remains stable, Bank of Slovenia says in its latest financial stability report. Currently estimated as low or moderate, the general level of systemic risks keeps declining. However, the central bank warned that cyber security risks are increased amid escalated geopolitical tensions.

Released twice a year, the Financial Stability Review is an assessment of systemic risks in banks and other financial institutions in the country. "The latest report brings quite a few positive messages," Bank of Slovenia deputy governor Primož Dolenc told a press conference in Ljubljana on Monday.

"The world economy, including the Slovenian economy, has proved to be quite resilient to the various shocks and challenges we have faced in recent years." Pointing to relatively favourable economic growth, Dolenc said Slovenia's macroeconomic situation was somewhat better than the EU average.

The European Central Bank's latest decisions show that by raising interest rates the country managed to bring down inflation and relevant projections significantly.

The report notes external risks to the banking system, with Dolenc underlining climate risks and, in light of escalated geopolitical tensions, increased cyber security risks.

Banks' resilience to the detected systemic risks is increasing, said Meta Ahtik, head of the central bank's Financial Stability and Macroprudential Policy department. This is related to their record-breaking results in 2023, which have already translated into additional capital, which in turn strengthens the system's resiliency.

Most of the six systemic risks that are included in the report are estimated as moderate, including financing risk. Non-bank deposits increased to a lesser extent last year compared to previous years, but they remained a stable source of banks' financing.

Real estate risk remains moderate. The central bank does not expect any significant drops in property prices for now.

Interest rate risk has been downgraded from increased to moderate, and credit risk remains moderate.

The hospitality sector, which was worst hit during the Covid pandemic, has recorded tremendous drops in non-performing claims, while larger shares of such claims are currently present in manufacturing, Ahtik said, adding: "However, for now this is only the case in a few companies."

Income risk continues to be estimated as low, but the report notes that banks will have a difficult job maintaining the existing revenue levels once interest rates start declining and costs rising.

Climate risk remains moderate, while cyber security risk is now assessed as increased due to an increasing number of cyber attacks. So far, the targets have been mostly public sector institutions, but the banking sector is the one that is especially vulnerable, Ahtik said.

The system's resilience regarding solvency and profitability has been upgraded to high in the wake of banks' record profits last year.

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