Opening address by the Governor at the joint conference of the Banka Slovenija and the International Monetary Fund

The speech as given takes precedence over the written version.

Ladies and gentlemen, distinguished guests,

It is my great pleasure to welcome you today at this conference, jointly organised by Banka Slovenije and International Monetary Fund. It is a revival of the partnership which started a decade ago. The idea for a joint event back then was to discuss the consequences of global financial crisis for the financial markets, and how banking landscape in the region will look like in the aftermath of the crisis.

The topic is still relevant 10 years later, although the issues pertinent to the financial markets have changed. Discussions related to repairing bank's balance sheets, revitalizing credit markets and foreign bank engagement in the region, which were relevant back then, are in the back row now. Instead, our attention has shifted to more long-term issues of a structural nature.

Let me mention two of them.

The first one is that economies of central, eastern, and south-eastern Europe made a significant progress in terms of economic convergence, our openness and integration and also financial development. However, the advancement was not even across these categories with financial markets lagging behind – banking sectors are still relatively small, if we compare them to the size of our economies, and banks stick to relatively basic business models.

And the second one is that other sources of finances remain even less important, while after their (re)opening in the 1990s, capital markets in the region progressed on the wave of privatization and integration into the EU, they have broadly stagnated over the past decade with some exceptions. The average market capitalization in relation to GDP remains only a quarter of the average observed in older EU member states.

Let me now move from open issues to possible solutions.

Robust and well-functioning financial system is essential for promoting financial stability, fostering economic growth and supporting transmission of monetary policy.

The key question then is, what are the policies, which will improve the situation? Combining the facts of the size and capacities of our economies with past experiences, an obvious solution is better integration. This can be achieved through common frameworks and harmonisation of legislation with the final stage being the capital markets union. It has been a project under the discussion for many years but unfortunately still just that.

And similar holds true for the banking union, which is also "a work – in – progress", though a lot has been done.

That is why today we will discuss different solutions. that is national initiatives, such as efforts to develop local capital markets, activities to promote financial literacy and trust-building in general.

The key question is how significant its contribution can be in speeding up the process of financial market developments.

Dear ladies and gentlemen,

Well developed financial systems offer a wide array of benefits in the sphere of growth and development. Speaking from the perspective of the central banker, well-developed financial systems are also important for the monetary policy transmission. Proof of that is the huge pile of academic literature, experiences across the globe and also what we, the institutions, who prepared today's event believe.

Therefore, the main ambition for today's discussion is how to advance the development of financial markets in the region, to benefit from what I have just mentioned, to set the scene for morning panel discussions and the round table in the afternoon.

Mr. Alfred Kammer, the director of the European department at the IMF, will now deliver his keynote speech.