Press release: Bank of Slovenia introduces two new macro-prudential measures
Pursuant to a resolution adopted by the Governing Board of the Bank of Slovenia at its 546th meeting of 8 December 2015, the Bank of Slovenia is introducing two new macro-prudential measures: the countercyclical capital buffer and the capital buffer for other systemically important banks.
1. Countercyclical capital buffer
The purpose of the countercyclical capital buffer (hereinafter: the buffer) is to protect the banking system against potential losses insofar as these are related to an increase in risks in the system as a result of developments in the financial cycle. The instrument aims to limit cyclical systemic risks and to contribute to the attainment of the intermediate macro-prudential policy objective of “mitigating and preventing excessive credit growth and excessive leverage”. The intermediate objectives of macroprudential policy are defined in the Guidelines for the macroprudential policy of the Bank of Slovenia.
The legal basis for the introduction of the buffer comprises the Banking Act (the ZBan-2; Official Gazette of the Republic of Slovenia, No. 25/15), which instructs the Bank of Slovenia to introduce the buffer by 1 January 2016.
The current economic situation and the banks’ low lending activity do not require active measures to be taken by the Bank of Slovenia, for which reason the buffer has been defined at 0% of the total risk exposure amount. The legal framework and the defined methodology of calculation have put in place an appropriate framework for setting positive rates for the buffer when the situation demands.
The current values of the risk indicators and the corresponding historical averages are given in Table 1. On the basis of the indicators of imbalances in the banking system that originate in excessive lending to the real economy, and expert judgements and analysis, it is assessed that at present there are no risks in the banking system that derive from excessive lending, for which reason the buffer rate in connection with credit exposures in Slovenia can be set at 0% of the total risk exposure amount.
Table 1: Indicators for setting the buffer rate
| Indicator\Value | Average value (2000Q1-2015Q3* | Value of indicators taken into account in the decision on the buffer made in 2015Q4** |
| Credit-to-GDP gap | -0.4% | -38.4% |
| Annual growth in real estate prices (available since 2001) | 4.4% | 3.5% |
| Annual growth in lending to domestic private non-financial sector | 11.3% | -5.7% |
| LTD ratio for private non-banking sector | 1.2 | 1.0 |
| Return on equity | -0.01 | -0.01 |
| Ratio of credit to gross operating surplus | 4.4 | 2.9 |
Sources: SORS and own calculations
*Value serves merely for orientation purposes.
**Latest available indicator value is used (2015Q3). The latest available value for annual growth in real estate prices is for 2015Q2.
A rate of 0% is applied to exposures located in Slovenia. The rates applied to exposures in other EEA countries are given on the ESRB website. A rate of 0% is applied to credit exposures located in countries that are not listed on the ESRB website.
More information on the buffer can be found under Financial Stability - Macro-prudential instruments - Countercyclical capital buffer.
2. Capital buffer for other systemically important institutions (O-SIIs)
The purpose of the structural macro-prudential measure of the capital buffer for O-SIIs is to increase loss coverage capacity and consequently to reduce the probability and impact of stress events, thereby contributing to the attainment of the intermediate macroprudential policy objective of “limiting the systemic impact of misaligned incentives to reduce moral hazard” defined by the Guidelines for the macroprudential policy of the Bank of Slovenia.
The legal basis for the introduction of the buffer comprises the Banking Act (the ZBan-2; Official Gazette of the Republic of Slovenia, No. 25/15) and the EBA Guidelines, whose application is set out by the Regulation on application of the Guidelines on the criteria to determine the conditions of application of Article 131(3) of Directive 2013/36/EU (CRD) in relation to the assessment of other systemically important institutions (O-SIIs) (Official Gazette of the Republic of Slovenia, No. 66/15).
On the basis of a point score derived in accordance with the EBA Guidelines, the Bank of Slovenia decided to designate NLB d.d., SID banka, d.d., Ljubljana, UniCredit Banka Slovenija d.d., Abanka d.d., Nova KBM d.d., SKB d.d., Sberbank d.d. and Banka Koper d.d. as O-SIIs.
The Bank of Slovenia simultaneously set out the buffer for O-SIIs in accordance with Article 221 of the ZBan-2. Banks are required to meet the buffer for O-SIIs as of 1 January 2019. The buffer rate (expressed as a percentage of the total risk exposure amount) depends on the score attained in the assessment of systemic importance pursuant to the EBA Guidelines, and is defined by the Regulation on the determination of the buffer for other systemically important banks (Official Gazette of the Republic of Slovenia, No. 96/15). Each bank must meet the buffer through common equity Tier 1 capital at the highest level of consolidation in Slovenia.
Table 1: Scores in assessment of systemic importance and capital buffer rates
| SYSTEMIC IMPORTANCE SCORE (EBA GUIDELINES) | CAPITAL BUFFER RATE AS OF 1 JANUARY 2019 (as proportion of total risk exposure amount) | |
| NLB d.d. | 2824 | 1.00% |
| SID banka d.d., Ljubljana | 1365 | 0.50% |
| UniCredit Banka Slovenija d.d. | 1191 | 0.50% |
| Abanka d.d. | 839 | 0.25% |
| Nova KBM d.d. | 706 | 0.25% |
| SKB d.d. | 464 | 0.25% |
| Sberbank d.d. | 433 | 0.25% |
| Banka Koper d.d. | 429 | 0.25% |
Source: Bank of Slovenia
More information on the buffer can be found under Financial Stability - Macroprudential instruments - O-SII buffer