Macroprudential supervision

The financial crisis has shown the need for a clearer definition of macroprudential policy and macroprudential supervision to mitigate and prevent systemic risk in the financial system.

The Macroprudential Supervision of the Financial System Act (in Slovene) was adopted in 2013, and governs the status, objectives, tasks, powers and functioning of the Financial Stability Board (FSB), and the manner of macroprudential supervision in Slovenia. It also sets out the tasks, powers, supervisory measures and instruments, and functioning of supervisory authorities in the area of macroprudential supervision. The Bank of Slovenia is one of the macroprudential supervisory authorities, and is also where the FSB secretariat is organised.

 
Purpose of macroprudential policy

The purpose of macroprudential policy is to mitigate the effects of financial cycles and to increase the resilience of the financial system to disruptions.Macroprudential 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 macroprudential policy is to contribute to safeguarding the stability of the entire financial system, including strengthening the resilience of the financial system, and preventing and mitigating the build-up of systemic risks, thereby ensuring a viable and sustained contribution to economic growth from the financial sector.
 

Bank of Slovenia’s activities

The Bank of Slovenia systematically collects, processes and analyses information impacting financial stability, and formulates proposed macroprudential measures in the area of banking.

The Bank of Slovenia’s analytical work in the area of macroprudential policy focuses on banks, non-banking financial institutions (insurers, investment funds, pension funds, leasing companies), and financial infrastructure.

In contrast to the supervisory activities within the framework of which the Bank of Slovenia monitors individual institutions (banks), in the area of macroprudential policy the Bank of Slovenia analyses the risk exposure of groups of financial institutions of the same type, the transfer of risk between these groups, and the transfer of risk to other sectors of the national economy (households, corporate sector), and develops macroprudential instruments to mitigate or prevent certain risks.

At the same time it uses stress testing to determine the extent to which the Slovenian financial system is resistant to feasible but low-probability shocks to which it could be exposed.

• The Bank of Slovenia issues its overall assessment of the stability of the Slovenian financial system twice a year in the Financial Stability Review.

 
International cooperation

With the increasing importance of financial stability and the Bank of Slovenia’s incorporation into the Eurosystem, international cooperation has also developed in the area of financial stability.

The director of the Bank of Slovenia’s Financial Stability and Macroprudential Policy Department is a member of the Financial Stability Board (FSB), and experts from the department sit on the its working groups and on the technical groups established temporarily to study specific areas. The Bank of Slovenia is also involved in the work of the Advisory Technical Committee and its substructures within the European Systemic Risk Board (ESRB).

• For more on recommendations issued by the ESRB and their implementation in Slovenia, see Macroprudential supervision in the EU.

Direct cooperation also proceeds in the form of bilateral meetings with experts from other national central banks.