Press release from the meeting of the Governing Board of the Bank of Slovenia of 28 July 2009
1. At today’s meeting the Governing Board of the Bank of Slovenia was briefed on the current performance of banks, developments on the capital markets and economic relations with the rest of the world.
2. The Governing Board was briefed on the key attributes of the TARGET2-Securities (TS2) system, the unified European securities settlement system, and the progress of the project.
3. The Governing Board was also briefed on the results of stress testing. The Bank of Slovenia has conducted macro stress tests for several years now, and micro stress tests since autumn 2008. These tests examine banks’ vulnerability to extreme events, including those of low likelihood. To this end the Bank of Slovenia drew up scenarios of adverse macroeconomic conditions (negative GDP growth, stagnation in credit growth, further falls in security prices and falls in real estate prices), and sent them to banks in April. It also drew up a scenario of a deterioration in the credit portfolio. Banks then assessed the effects on their profitability and capital adequacy on the basis of these scenarios. The Bank of Slovenia also conducted its own stress tests of various scenarios of a deterioration in the credit portfolio. The results of the banks’ stress tests were slightly more optimistic, banks having allowed for the effects of various mitigating factors (capital increases, insurances, etc.).
The general conclusion is that the banking system is relatively robust, as the capital adequacy of the banking system remained above the prescribed minimum of 8% in all the scenarios. These results are primarily attributable to the relatively large absorption capacity provided by the currently high capital adequacy and bank profitability from ordinary operations. However, it should be noted that capital adequacy approaches the minimum at certain banks.