The Slovenian banking system remains stable, resilient and well-prepared for potential shocks. This was confirmed by the results of the macro stress tests used by Banka Slovenije to regularly examine the general resilience and capital adequacy of the banking system, under a baseline scenario and an adverse scenario. Amid otherwise favourable results, Banka Slovenije should also draw attention to the increased risks associated with potential new geopolitical and energy shocks, which could have an impact on the economic and financial environment. With the aim of considering potential scenarios for the materialisation of geopolitical risks, and deepening our understanding of the effects on bank portfolios and performance, we also conducted reverse micro stress tests under the aegis of the ECB. The scenarios drawn up by the banks were generally reasonable and credible.
The macro stress tests confirmed the robustness of the Slovenian banking system.
Banka Slovenije has again conducted macro stress test this year. Under a top-down approach, the macro stress tests allow us to assess the potential impact and the consequences for the stability of the banking system if the unlikely but plausible systemic risks assumed under the macroeconomic scenario are realised.
The baseline scenario for banking is based on the ECB’s projections from March 2026. This assumes slightly stronger but moderate GDP growth, a tight labour market, and a slowdown in inflation towards the target rate of 2%. The adverse scenario envisages a significant decline in GDP, and higher inflation than under the baseline scenario, driven by geopolitical tensions that hit commodity prices. This would lead to an increase in net impairments and provisions, a rise in interest rates for households and firms, and a decline in bank turnover.
Banka Slovenije finds that the Slovenian banking system remains stable, with sound capital adequacy, even in the event of the realisation of the plausible but less probable adverse macrofinancial scenario. The banking system will maintain stable capital adequacy over the next three years. The results show the capital adequacy of the banking system remaining at a high level under the baseline scenario, in reflection of the banks’ preparedness for potential challenges, which is a major factor in the general resilience of the system and the confidence in financial stability. Even in the event of the realisation of the adverse scenario the banking system continues to surpass the minimum regulatory requirements with regard to capital, further confirmation of its robustness and its ability to effectively manage potential shocks. The risks associated with potential new geopolitical and energy shocks, which could have an impact on the economic and financial environment, remain elevated.
Micro stress tests deepen understanding of the effects of geopolitical risks
Targeted thematic stress tests were conducted under the aegis of the ECB for all significant institutions in the euro area. Reverse stress tests were employed on this occasion, and covered 110 significant banks in the euro area, including three significant banks in Slovenia. Stress tests were also conducted at Banka Slovenije for the remaining Slovenian banks using the same methodology.
This year’s targeted thematic exercise focused on geopolitical risks. The banks designed the scenarios themselves to cause a predetermined decline of 300 basis points in the capital ratio. The aims of the exercise were to deepen understanding of the effects of geopolitical risks on bank portfolios and performance, to give banks the opportunity to draw up and quantify their own scenarios, to identify potential measures to mitigate the adverse effects, and above all to develop reverse stress testing. The precise quality of the scenarios, the transmission channels and the mitigation measures varied from bank to bank, but in general they were reasonable and credible.
The exercise conducted at Banka Slovenije based on the ECB methodology also showed similar findings for smaller banks and savings banks in Slovenia.
More information about this year’s stress tests can be found on the ECB website.