The Slovenian banking system remains stable and resistant to shocks, showed the latest stress tests. Macro tests have confirmed capital adequacy, while the micro-central bank (ECB) micro-central bank test is wider, focused on geopolitical risks, further confirmed the resilience of the Eurozone Banking Sector.
The Bank of Slovenia conducted macro stress tests to assess potential effects and consequences for the stability of the banking system in the event of little likely, but possible systemic risks from the macroeconomic scenario. This year’s stress tests cover the period from 2025. to 2027. year, based on data from 2024.
The basic scenario is based on the Central Prognosis of the Bank of Slovenia from December 2024, which envisages moderate GDP growth, labor market demands and inflation around the target level of 2%. The stress scenario envisages the decline in GDP, temporary growth of inflation due to geopolitical tensions and growth of interest rates.
In both the basic and stress scenario, the Bank of Slovenia concluded that the banking system is stable and to show satisfactory capital adequacy, investor me. However, the main risks come from aggravated geopolitical circumstances that already influence the slowdown in the domestic economy and the negative forecast.
Stress Test of the European Central Bank
The European Central Bank and the European Banking Agency in parallel conducted regular stress tests for 96 significant banks in the euro area, including one of Slovenia – NLB. The aim of the testing was to assess the impact of credit, market and operational risks, as well as risks per net interest revenue, to the capital position of banks for the period 2025-2027.
The scenarios included the decline in GDP, the growth of unemployment and the decline in real estate prices. It was also taken into account the demand of the end of the period, with lower long-term interest rates compared to stress tests from 2023.
Conclusion The tests is that the eurozone bank sector can withstand serious economic shocks. Although in an unfavorable scenario there would be larger losses due to the deterioration of credit and market risk, reduction of capital would be less than 2023. years.
Milnier effects by capital, the Bank of Slovenia, are the result of better initial bank profitability, which enabled high interest rates and stable quality assets. However, the sustainability of high profits is not safe and differs among banks.
Stress tests have also shown that the existing capital pillows support system resistance. As it stands out, tests were conducted in the conditions of high macrofinance uncertainty, which requires a continuation of cautious capital planning and continuously strengthening financial and operational resistance, including investment in information technology and cyber security.
