Meeting of the Governing Board of the Bank of Slovenia of 6 December 2011
1. At today's meeting the Governing Board of the Bank of Slovenia discussed current economic and financial developments, and approved the release of the Report on Economic and Financial Developments, November 2011, and the Report on International economic relations (External Statistics), September 2011.
Economic activity slowed by 0.2% in the third quarter relative to the second quarter, driven by a decline in industrial output owing to a drop in foreign demand. Growth in revenue was lower in certain export-oriented sectors. The necessary cost adjustment of the economy to the lower level of activity continues to be reflected in a contraction in employment and slowing wage growth, with reduced consumer purchasing power. At the same time, the crisis in the construction sector remains pronounced, with negative effects on the banking sector as well.
During a period of significantly increased uncertainty on the public debt markets, it is crucial to establish credible fiscal consolidation and clearer communication with the financial markets. Analyses indicate that the current yields on long-term Slovenian government bonds is too high given the macroeconomic bases, and is the result of factors such as uncertainty regarding the handling of fiscal consolidation and the adoption of structural reforms for sustained economic growth. Appropriate measures from economic policymakers are necessary in this respect, and could facilitate the relatively rapid decline of yields on Slovenian government bonds.
2. The Governing Board of the Bank of Slovenia discussed regular monthly information regarding the current operations of banks, developments on the capital markets and developments in the area of interest rates.
Lending activity at Slovenian banks has also contracted due to the tightening of conditions on the international financial markets and adverse macroeconomic developments. The banking system maintains an adequate level of liquidity and solvency by attracting deposits from non-banking sectors and by participating in Eurosystem auctions. Data from banks regarding the movement in household deposits over the first ten months of this year indicate that household deposits were up EUR 168 million, despite the balance sheet decline.
3. The Governing Board of the Bank of Slovenia was briefed on an analysis of the possible negative consequences of continuing adverse economic developments, unfavourable conditions on the financial markets and the effects of the high costs of borrowing on the operations of Slovenian banks. The analysis indicates that is very likely that poor financial results can be expected again in 2012, together with the need for the continued creation of impairments and capital injections by banks. Depending on economic developments, the easing of conditions on the international financial markets and the improving financial structure of corporate operations, the financial results of the banking sector can be expected to improve in 2013.
4. The Governing Board of the Bank of Slovenia adopted the following regulations with the aim of transposing Directive 2010/76/EU of the European Parliament and of the Council of 24 November 2010 amending Directives 2006/48/EC and 2006/49/EC as regards capital requirements for the trading book and re-securitisations, and the supervisory review of remuneration policies (Capital Requirements Directive III - CRD III), into Slovenian law:
- Regulation amending the Regulation on the calculation of the capital of banks and savings banks,
- Regulation amending the Regulation on the calculation of capital requirements for credit risk in securitisation and the Rules on the exposure of banks and savings banks to transferred credit risk,
- Regulation amending the Regulation on the calculation of capital requirements for market risks for banks and savings banks, and
- Regulation amending the Regulation on disclosures by banks and savings banks.
5. The Governing Board of the Bank of Slovenia adopted the following regulations on the basis of the EU regulation on credit rating agencies:
- Regulation amending the Regulation on the recognition of external credit rating institutions, and
- Regulation amending the Regulation on the calculation of capital requirements for credit risk using a standardised approach for banks and savings banks.