Press release after the Meeting of the Governing Board of the Bank of Slovenia on 12 November 2013
1) The Governing Board of the Bank of Slovenia discussed current supervisory matters.
2) The Governing Board of the Bank of Slovenia discussed current economic and financial developments, and approved the October 2013 report on Economic and Financial Developments and the August 2013 report on Slovenia’s International Economic Relations. The Governing Board also discussed the report on the performance of the banks in the current year, developments on the capital market, and interest rates.
Economic growth in the most important trading partners is expected to be relatively favourable for the remainder of the year. Aggregate developments in Slovenia were stable in the third quarter.
Confidence indicators are gradually improving, particularly in connection with construction and manufacturing. Growth has yet to fully resume in manufacturing, while the decline in turnover in wholesale and retail trade suggests that household consumption remains weak. The situation in the majority of the other service segments of the private sector is more favourable, while there are also signs of a gradual stabilisation in construction.
The news from the labour market has also been relatively favourable in recent months. The workforce in employment is rising as a result of stronger hiring in the private sector. Year-on-year inflation as measured by the HICP fell to 1.1% in September. It nevertheless remains above the euro area average, although solely as a result of the rise in VAT in the summer. The current account surplus in the 12 months to August reached 6.6% of GDP, primarily as a result of a significant year-on-year decline in merchandise imports.
The aforementioned developments reflect a gradual levelling of the imbalances incurred prior to the crisis, and are mostly in line with expectations.
Slovenia is continuing to pass and implement numerous structural reforms aimed at eliminating the remaining imbalances and giving gradual impetus to the economy. Together with the ongoing efforts aimed at fiscal consolidation and at the elimination of problems in the banking sector, this is the key to re-establishing undisrupted access to funding on the international financial markets.
The changes in the banks’ balance sheets are to a great extent a reflection of the changing situation in the performance of the real sector. The pace of the contraction in lending has slowed in recent months, to both corporates and households. The year-on-year contraction in corporate loans has remained between 13% and 13.7% in the last four months.Year-on-year growth in housing loans has stagnated at 0.1%, while growth in consumer loans remains around -8.5%. However, there was an above-average increase in impairment and provisioning costs in September, which further increased the banking system’s operating loss. Faster, more effective restructuring of the economy, which is over-leveraged on average, supported by recapitalisation, will also contribute to the revival of the banks’ lending activity and to a consequent improvement in their performance.
Cleaning up the economic activities of the real sector to purge activities that do not constitute the core business activities of each firm will make a significant contribution to improving the performance of firms in the real sector, and thus the banks’ performance. The real sector will thereby focus more on the development of each firm’s core activities.
3) The Governing Board of the Bank of Slovenia approved the report on the operations of payment systems for the third quarter of 2013.
4) The Governing Board of the Bank of Slovenia requested a full audit of the operations and governance of Probanka d.d. and Factor banka d.d. (for the period between 2006 and 2012). In the event of the discovery of suspected detrimental or criminal acts in the banks’ operations, the special administrations will examine the evidence, hiring forensic investigators for this purpose as necessary. The special administrations will notify the relevant prosecution authorities of their findings, and will initiate other proceedings as appropriate to protect the banks’ interests.