mandate 17. 7. 2013−30. 4. 2018
Independent, professional, international Bank of Slovenia 2013-18
“To avoid criticism, say nothing, do nothing, and be nothing,” are words attributed to Aristotle. These are the words I used to open my speech in 2017, when Mario Draghi, the then president of the ECB, visited Banka Slovenije to mark ten years of Slovenia in the euro area.
Over the ten years of Slovenia as part of the euro, we had gone from the poster child as the first of the ‘new’ EU states to join the euro, to bottom of the class as one of the countries hit hardest by the financial crisis of 2008. One of causes of the banking crisis in Slovenia, as elsewhere, was the rapid and imbalanced expansion of the economy just before the crisis. This growth was further amplified in Slovenia by the uniquely national character of the privatisation process.
The effects of the financial crisis were compounded in Slovenia by the slow response in tackling the issues facing the banking system there. All the while, economies around the world, and particularly those of the EU, were using all available means to aid their banking systems. Slovenia waited until 2013 to carry out the much-needed recapitalisation of its bank. Finally, Slovenia carried out the process of bank recovery and resolution, thus allowing our economy to regain its pre-crisis position relatively quickly. The macroeconomic performance and indicators since 2013 have confirmed that bank recovery and resolution was undertaken properly, and have restored Slovenia to its rightful economic position in the EU.
Changes in the international environment
The Slovenian government’s relationship with Banka Slovenije and other institutions was put to the test during the financial crisis. However, we overcame the crisis, in part because Banka Slovenije acted independently and professionally. The Bank acted in line with the international rules that formed the basis for the creation of the European Banking Union. The Banking Union was the EU’s response to end the use of taxpayers’ money in bailing out private banks, while ensuring financial stability for its people and businesses.
The European Banking Union came to life with the establishment of the unified system of banking supervision in 2014 – the Single Supervisory Mechanism - which is the Banking Union’s first pillar. The second pillar was put in place in 2015, with the establishment of the Single Resolution Mechanism. The third pillar is the unified system of deposit insurance, which is still waiting for full realisation. Banka Slovenije has played a part in the construction of the European Banking Union, through proposals, solutions and personnel, including work with representatives of the government. None of this would have been possible had Banka Slovenije not ensured a high level of expertise among its staff ever since its establishment. A number of people at Banka Slovenije were given the opportunity to work for the Single Supervisory Mechanism when it was established in 2014, which led to an improved flow of information, and even greater integration of Banka Slovenije’s actions within the framework of the European System of Central Banks. And it was only with the professionalism shown by all staff at Banka Slovenije that the work of the central bank could be pursued independently of daily politicking, but fully subjugated to the goals of monetary policy, banking supervision and financial stability. Despite Banka Slovenije’s pronounced engagement at the international level, its key concern always remained the functioning of the banking and financial system in Slovenia, and the maintenance of the macroeconomic balance in the economy. The adoption of the Macroprudential Supervision of the Financial System Act in late 2013 created the legal basis for macroprudential supervision in Slovenia. The following year saw the creation of the Financial Stability Board (FSB), whose task was formulating macroprudential policy in a collaboration between Banka Slovenije, the Securities Market Agency and the Insurance Supervision Agency, with input from representatives of the Ministry of Finance. As governor of Banka Slovenije, I was entrusted with the role of chairing the FSB.
Banka Slovenije strategy and reorganisation
In 2014, in response to the changes being driven by the international environment, Banka Slovenije began drawing up a new strategy for the period of 2015 to 2020. Following conversations with staff, and visits to other central banks, and above all with the desire to make Banka Slovenije an advanced learning institution that creates a new culture of leadership and governance, we set out five fundamental objectives in the strategy: enhanced supervision of the banking and financial systems; in-depth understanding of the key macroeconomic challenges and the prompt imposition of measures, admonishments and proposals; a higher-profile role for Banka Slovenije in the Eurosystem and the EU; effective and efficient performance with flexible organisation and highly motivated staff; and improved reputation and public trust. These five fundamental strategic objectives were further broken down into several hundred tasks, some daily, assigned to staff, which allowed us to follow up how the strategy was being implemented and how the objectives were being met.
Under the strategy the bank was reorganised into four divisions in 2014: analysis, operations, supervision and general affairs. The divisional reorganisation enhanced cooperation between the divisions and other organisational units, while simplifying communications and the functioning of Banka Slovenije as a whole. A number of separate organisational units were also established: the resolution unit, the central credit register and the compliance department. The new organisational structure also brought changes to the planning system, with an emphasis on clearly set objectives, results and accountability. A new in-house documentation system was put in place to help optimise operations and to reduce risks.
Another change that greatly pleased all staff was the renovation of the kitchen and canteen, and the refurbishment of the lobby, which became a place for socialising, for meetings and for events, which Banka Slovenije began organising in large numbers. At that time we purchased and began refurbishing the old Nama premises, and brought the Mala Galerija back into the Banka Slovenije fold. An agreement was reached with rector’s office of the University of Ljubljana for the Mala Galerija to become a space showcasing young creatives working in fine art, sculpture, photography, design, textiles, architecture and landscaping. It was particularly satisfying that students from the University of Ljubljana’s Faculty of Architecture, working with their mentors, were able to play a substantive part in the renovation of existing buildings for Banka Slovenije’s needs.
An overhaul of the intranet brought better internal communications and connections between staff, which helped them be more effective in their areas of expertise. The introduction of internships for students at all Slovenian universities, and enhanced collaboration with the universities of Johns Hopkins and Harvard in the US resulted in a flow of knowledge that gave us insight into advanced study methods in the areas of financial mathematics, macroeconomics and information science. The introduction of attractively remunerated positions for staff with doctorates gained us a number of new recruits who came to Banka Slovenije from all corners of the globe. In conjunction with the School of Economics and Business in Ljubljana and with Stanford University, several workshops were held in design thinking, which helped us to introduce innovative and creative approaches into our everyday work, and led to better-organised meetings, improvements in report writing, and more intensive communications between staff. All of this was faithfully recorded in Banka Slovenije’s annual reports, which were completely overhauled and substantively upgraded.
Banka Slovenije’s profile in the international environment
All of the aforementioned activities in the areas of organisation, leadership and governance introduced at Banka Slovenije as of 2014 helped to raise its profile at the international level. As governor of Banka Slovenije I was appointed to the eight-person central bank governance group at the Bank for International Settlements in Basel in 2016. The group was established in response to issues relating to the governance of central banks as public institutions. It focuses on the institutional and organisational setting in which central banks pursue monetary and financial policies. Other members during my time in the group included Janet Yellen, chair of the Federal Reserve, Zhou Xiaochuan, governor of the Chinese central bank, and Agustin Carstens, now general manager of the Bank for International Settlements.
In keeping with its strategic objectives of building its reputation and level of public trust, and raising the profile of Banka Slovenije’s role in the Eurosystem and the EU, we also organised a variety of domestic and international events, conferences, seminars and workshops. We published a number of the proceedings from these events, which attracted a good deal of attention within the profession.
In conjunction with the IMF we organised two high-profile international conferences in Portorož in 2016 and 2018, which attracted a host of central bankers, representatives of financial institutions and renowned academics. We hosted almost a third of the governors on the Governing Council of the ECB in Portorož in 2016, a particularly notable achievement.
Over all these years we enjoyed excellent collaboration with the European Commission Representation in Slovenia, the European Investment Bank, the European Bank for Reconstruction and Development, and the IMF.
Together with the Centre for Economic Policy Research (CEPR) in London, we set up the European Central Bank Network (ECBN) in 2015 to promote collaboration between researchers at the participating central banks, the academic world, and policymakers on issues of relevance to central banks around the world during the year in question. Three ECBN research conferences were organised by Banka Slovenije and held in Ljubljana, where researchers from more than 20 European central banks presented their analysis on the suggested themes. After each conference a publication was issued by the CEPR in London, which laid the foundation for a series of discussions in other forums as part of the European System of Central Banks.
Banka Slovenije began holding its open day and outreach events in 2017. They were aimed at raising financial literacy among the general public, in particular those of primary and secondary school age, and pensioners. The education days were not only an opportunity for visitors to Banka Slovenije to learn about the workings of the central bank, but also an opportunity for staff to share their knowledge outside of work meetings. A highlight of each year was the Generation €uro competition for secondary school students, where groups of students test their knowledge of economics and their awareness of the working of euro area monetary policy. Each year the winners attend the prize ceremony at the ECB in Frankfurt.
Banka Slovenije and its staff
I was quoted in one of the IMF’s publications in 2017 as saying that institutions consist of the people who work at them and manage them. In addition to expanding their expertise, and their education and research opportunities, Banka Slovenije was also fully concerned for the wellbeing of its staff, and organised a host of activities such as sports, a photography circle and a choir. Banka Slovenije staff regularly took medals at competitions for international central bank employees, and their photographs were used in Banka Slovenije greeting cards and calendars, a nice point of distinction from other central banks around the world.
In a changing external environment, which was always bringing new challenges and new tasks, we were able to put in place a framework and culture that encouraged independence, professionalism and responsiveness on the part of staff. These progressive changes benfited the operations of Banka Slovenije, with knock-on benefits to the financial system.