Stress tests: Slovenian banking system remains stable and resilient to potential exogenous shocks

Stress tests show that the Slovenian banking system remains stable, and resilient to potential shocks. These indications came from the micro stress tests conducted under the aegis of the ECB, which on this occasion focused on cyber resilience, and also from the macro stress tests, which examine the banking system’s general resilience and capital adequacy.

Micro stress tests

Under the aegis of the ECB stress tests of cyber resilience were conducted for all significant banks in the euro area, including three significant Slovenian banks. Based on a scenario that envisaged a hypothetical cyberattack on the core banking information system, we tested the operational working of key economic functions such as deposit taking and lending, and estimated the financial losses during the hypothetical attack.

The results show that according to commercial banks’ self-assessments, a hypothetical cyberattack would not have a major impact on the working of key economic functions, and thus no major impact on operational and financial stability. Neither would it have any impact on the liquidity of the banking system or on funding risk. Our assessment is that the banks would respond adequately to a security event of this kind under this scenario. Given the rise in risks of this kind, it is important that in the future banks continue investing in the right technological resources to upgrade their information systems.

The same conclusions could be drawn from the stress tests for smaller Slovenian banks and savings banks that were conducted at Banka Slovenije using a similar methodology.

More information about this year’s stress tests can be found on the ECB website.

Macro stress tests

Banka Slovenije also conducted macro stress tests to make a top-down assessment of the general stability of the banking system. This year’s macro stress tests included a projection of bank performance for the horizon of 2024 to 2026, based on data from the end of 2023.

The baseline scenario is based on a core macroeconomic projection that assumes the maintenance of moderate GDP growth, and elevated inflation that gradually slows, while developments on the labour market remain relatively favourable. The adverse scenario features a significant contraction in the economy in an environment of elevated inflation.

Banka Slovenije’s finding is that the Slovenian banking system is stable under the baseline and adverse scenarios alike, and continues to disclose sufficient capital adequacy. Amid these good results, the principal risks relate to the geopolitical situation.