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Home  > Financial stability    

Financial stability

Striving for financial stability is the Bank of Slovenia’s statutory duty

At the Bank of Slovenia, financial stability is defined as a situation in which the components of the financial system (financial markets, financial institutions and the financial infrastructure) function without systemic disruptions, and in which each component of the system provides the greatest possible degree of flexibility in responding to any shocks that occur.

Paragraph 3 of Article 4 of the Bank of Slovenia Act defines the Bank of Slovenia’s responsibility for financial stability as follows:
(3) In pursuing the primary objective specified in the first paragraph of this article, and the objective specified in the second paragraph of this article, the Bank of Slovenia shall strive for financial stability, while taking into account the principles of an open market economy and free competition.
 

Financial stability and the Bank of Slovenia

The increasing importance of financial stability led to the Bank of Slovenia creating the Financial Stability Department in 2004. The department was renamed in 2014. Its new name, “Financial Stability and Macro-Prudential Policy”, reflects the additional functions that the department has recently assumed. The financial crisis has shown the need for a clearer definition of macro-prudential policy and macro-prudential supervision to mitigate and prevent systemic risk in the financial system. The Macro-Prudential Supervision of the Financial System Act (ZMbNFS) was also adopted in 2013, and governs the status, objectives, tasks, powers and functioning of the Financial Stability Board (FSB), and the manner of macro-prudential supervision in the Republic of Slovenia. It also sets out the tasks, responsibilities, supervisory measures and instruments, and the work of supervisory bodies in the area of macro-prudential supervision. The Bank of Slovenia is one of the macro-prudential supervisory bodies, in the scope of which an FSC Secretariat is also organised.
The purpose of macro-prudential policy is to mitigate the effects of financial cycles and increase the resilience of the financial system to disruptions. Macro-prudential policy identifies, monitors and assesses systemic risks to financial stability, and adopts the requisite measures for the prevention and mitigation of systemic risks. The ultimate objective of macro-prudential policy is to contribute to safeguarding the stability of the entire financial system, including the strengthening of the resilience of the financial system and preventing and decreasing the build-up of systemic risks, thereby ensuring the financial sector’s sustainable contribution to economic growth. 

The department systematically collects information affecting financial stability, processes it, analyses it, and presents the findings to the senior management of the Bank of Slovenia and to the public at large. Likewise, it also formulates proposed macro-prudential measures in the area of banking,
The Financial Stability Department’s analytical work focuses on banks, non-banking financial institutions (insurers, investment funds, pension funds, leasing companies), and financial infrastructure. In contrast to the supervisors monitoring individual institutions, the Financial Stability Department analyses the risk exposure of groups of similar financial institutions, the transfer of risk between these groups, and the transfer of risk to other sectors of the national economy (households, corporate sector) and develops macro-prudential instruments that could mitigate or reduce the realisation of certain risks.
At the same time, it also uses macro stress testing to determine the extent to which the Slovenian financial system is resistant to low-probability shocks to which it could be exposed.

The Financial Stability and Macro-Prudential Policy Department draws up, in addition to several internal analysis, two comprehensive analysis each year. Financial Stability Review assesses the stability of the Slovenian financial system as a whole.

International cooperation

With the increasing importance of financial stability and the Bank of Slovenia’s incorporation into the Eurosystem, international cooperation has developed. The director of the Bank of Slovenia’s Financial Stability Department is a member of the Banking Supervisory Committee, and experts from the department sit on the Working Group on Macro-Prudential Analysis, and on the technical groups established temporarily to study specific areas.

Direct cooperation also proceeds in the form of bilateral meetings. This working cooperation is supplemented with professional training, most frequently at the ECB and other central banks.

Bank of Slovenia
Slovenska 35
1505 Ljubljana
Slovenia
Phone: +386 1 471 90 00
Fax: +386 1 251 55 16
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