Financial stability

Striving for financial stability is the Bank of Slovenia’s statutory duty

At the Bank of Slovenia, financial stability is defined as a situation in which the components of the financial system (financial markets, financial institutions and the financial infrastructure) function without systemic disruptions, and in which each component of the system provides the greatest possible degree of flexibility in responding to any shocks that occur.

Point 3 of Article 4 of the Bank of Slovenia Act defines the Bank of Slovenia’s responsibility for financial stability as follows: (3) In pursuing the primary objective specified in the first paragraph of this article, and the objective specified in the second paragraph of this article, the Bank of Slovenia shall strive for financial stability, while taking into account the principles of an open market economy and free competition.

Financial stability and the Bank of Slovenia

The increasing importance of financial stability led to the Bank of Slovenia creating the Financial Stability Department in 2004. The department systematically collects information affecting financial stability, processes it, analyses it, and presents the findings to the senior management of the Bank of Slovenia and to the public at large. The Financial Stability Department’s analytical work focuses on banks, non-banking financial institutions (insurers, investment funds, pension funds, leasing companies), and financial infrastructure. In contrast to the supervisors monitoring individual institutions, the Financial Stability Department analyses the risk exposure of groups of similar financial institutions, the transfer of risk between these groups, and the transfer of risk to other sectors of the national economy (households, corporate sector).

At the same time, it also uses stress testing to determine the extent to which the Slovenian financial system is resistant to low-probability shocks to which it could be exposed. The Financial Stability Department draws up, in addition to several internal analysis, two comprehensive analysis each year. As a rule it presents its Financial Stability Review in June, which assesses the stability of the Slovenian financial system as a whole. In fall it prepares an assessment of resistance of the Slovene banking system to shocks in the form of stress tests.

International cooperation

With the increasing importance of financial stability and the Bank of Slovenia’s incorporation into the Eurosystem, international cooperation has developed. The director of the Bank of Slovenia’s Financial Stability Department is a member of the Banking Supervisory Committee, and experts from the department sit on the Working Group on Macro-Prudential Analysis, and on the technical groups established temporarily to study specific areas.

Direct cooperation also proceeds in the form of bilateral meetings. This working cooperation is supplemented with professional training, most frequently at the ECB and other central banks.

Financial Stability Publications:

• Financial Stability Review and Expert Papers
• Stability of the Slovenian Banking System