Executive Summary
We assess that risks to the Slovenian financial system remained moderate and stable in the first quarter of this year. However, the outlook for the coming period has deteriorated due to increasing uncertainty in the international environment. To provide a clearer picture of the risks, which currently stem primarily from external factors, we have included macro-financial risks in the Financial Stability Review (hereinafter: the review). Ongoing trade and geopolitical tensions, the new military conflict in the Middle East, and the resulting increase in energy prices are increasingly affecting the real economy. Heightened volatility in global financial markets could, in the event of significant shifts, trigger liquidity issues in the non-bank financial sector, which could indirectly spill over into the domestic economy. We therefore assess macro-financial risks for Slovenia as elevated, with an unfavourable outlook. Due to the continued rise in real estate prices and the faster growth of housing loans, we have downgraded the outlook for risks stemming from the real estate market, although the risk itself remains assessed as moderate. Considering the deteriorating macro-financial environment, we have also downgraded the outlook for credit risk compared to the October review, while the risk assessment remains moderate. Other risk assessments and outlooks remain unchanged compared to the October assessment. The resilience of the banking system is still assessed as high, as robust capital adequacy and high liquidity enable banks to effectively absorb potential macroeconomic shocks. Bank profitability remained at a high level over the past year despite a year-on-year decrease, allowing banks to further strengthen capital buffers and cover potential increases in impairments.
Table: Overview of Risks and Resilience Assessed by Banka Slovenije for the Slovenian Financial System
Note: The risk and resilience assessments shown on the colour scale refer to the evaluation for up to one quarter ahead. The arrow indicates the expected change in risk or resilience on the scale (upward or downward) over a somewhat longer horizon, approximately one year. For risks, an upward (downward) arrow indicates an increase (decrease) in risk, while for resilience, it indicates strengthening (weakening) over the next twelve months. The overview of risks and resilience in the banking sector is based on an analysis of key risks and resilience factors for the Slovenian banking system and is defined as a set of quantitative and qualitative indicators for identifying and measuring systemic risk and resilience. As of the first quarter of 2026, macro-financial risks have been included in the risk and resilience overview (until 2023, the overview included a somewhat narrower definition of macroeconomic risk).
Source: Banka Slovenije.
The assessment of macro-financial risks is elevated with an upward trend, as increasing geopolitical and trade uncertainty, alongside rising energy prices, is gradually spilling over into domestic macro-financial risk. US trade policy and the wars in Ukraine and the Middle East, in addition to their effects on the real sector, are causing greater volatility in international financial and commodity markets. In the highly open Slovenian economy, which is strongly exposed to external shocks, this amplifies risks to economic growth and inflation. Any further tightening of conditions could, due to even higher energy prices and supply chain disruptions, significantly worsen the financial position of companies and households, which would, with a lag, be reflected in increased credit risk. To monitor these developments more precisely, the first thematic box introduces a financial stress indicator for Slovenia, representing the first comprehensive attempt at systematic measurement of systemic pressures, tailored to the specifics of the domestic financial environment.
The risk to financial stability arising from the real estate market remains moderate. However, with the continued rise in real estate prices, increasing overvaluation, and strong growth in housing loans, these risks could intensify. Despite increased sales activity, the supply of residential real estate continues to lag behind demand, which, together with currently favourable financing conditions, maintains upward pressure on prices. This pressure may be further reinforced by rising prices of fuel, raw materials, and construction materials, due to geopolitical developments. In the commercial real estate market, price growth is moderating amid increased sales, and the banking system’s exposure to this segment remains limited due to the relatively small volume of loans.
Funding risk remains moderate with a stable outlook. Deposits from the non-bank sector further strengthened in 2025, driven by strong inflows from households and non-financial corporations, and continued to serve as the primary source of funding. With low deposit interest rates, the volume and share of sight deposits are increasing, which, in a highly digitalised environment, raises the risk of rapid and large-scale transfers of funds between banks. In connection with these digital trends, the second thematic box addresses stablecoins and their impact on financial stability. Despite the current stability of funding sources, it will remain crucial for banks to closely monitor savings habits and adapt their offerings to competitive digital services.
Interest rate risk in the banking system remains moderate with a deteriorating outlook. The repricing gap and, consequently, banks’ interest rate sensitivity increased further last year. At the same time, banks have strengthened their hedging against interest rate changes by increasing the volume of interest rate swaps. The main factors contributing to the widening gap and increased sensitivity remain the growth in fixed-rate housing and consumer loans, as well as increased investments in debt securities amid shrinking primary liquidity.
Credit risk remains moderate, but its outlook is maintained as deteriorating given the uncertain economic environment. The share of non-performing exposures (NPE) increased noticeably towards the end of the year, mainly due to reclassifications of exposures at certain companies in manufacturing activities, which does not yet reflect a broader deterioration in debt servicing. Due to the war in the Middle East and high prices of energy and some other commodities, economic conditions are becoming more uncertain, increasing the risk of a deterioration in asset quality, especially in energy-intensive companies, the chemical industry, logistics, and construction. Banks also expect a deterioration in the quality of exposures to households. Coverage with impairments and provisions has decreased in both the non-performing and performing parts of the portfolio.
Income risk in the Slovenian banking system remains low with stable prospects, as banks maintain a favourable income position and a high net interest margin following the stabilisation of monetary policy. Net interest income and margin remain high despite a decline last year, and non-interest income is stable, mainly due to growth in net fees and dividends. Growth in operating costs fell below two percent last year, and the cost-to-income ratio remains below average, with the third thematic box providing a more detailed overview of employee remuneration in the banking system. Both gross and net income of banks remain at relatively high levels. Geopolitical uncertainties could, over the longer term, affect loan demand and thus bank revenues, but current interest rate levels and stable non-interest income suggest that banks’ income position will remain favourable in 2026, with operating costs expected to grow steadily.
Cyber risk in the Slovenian banking sector remains elevated with a stable trend, mainly due to heightened geopolitical tensions. Banks did not report any major cyber incidents with material damage in 2025 and early 2026, but did experience disruptions due to technical failures in payment systems. The main threats are increasingly sophisticated attacks on clients, supported by artificial intelligence, and high exposure to external ICT service providers. Geopolitical tensions point to a continued increase in cyber threats and online fraud at the global level, requiring ongoing efforts to strengthen system resilience.
Climate risks in the banking system remain moderate with a stable trend. Exposure to climate-sensitive activities has slightly increased, while carbon indicators have improved significantly due to changes in the structure of exposures (a reduction in exposures to electricity, gas, and steam supply, and agriculture). Credit risk in climate-sensitive activities has increased due to risk concentration in certain manufacturing companies, while physical risks remain low and stable. The share of exposures to areas with high physical risk is low, as is the risk of interaction between physical and transition risks. Geopolitical risks remain a source ofuncertainty, which can indirectly affect climate risks, particularly through energy prices and the timeline for the green transition.
The Slovenian banking system maintains high capital resilience, supported by high solvency ratios and above-average profitability at the end of 2025. Growth in regulatory capital, based on retained earnings and new capital issues, outpaced the growth in risk weighted exposures. Despite expected pressure on capital ratios in 2026 due to rising credit risks and uncertainty, we assess that solvency will remain high. Although return on equity (ROE) declined somewhat last year due to lower income and higher impairments, it still exceeded both the long-term average for Slovenia and last year’s euro area average. Further allocation of profits to reserves will be key to maintaining system stability going forward.
Liquidity resilience in the banking system remains high and stable, despite a slight deterioration in some indicators. The ability to cover net liquidity outflows in short-term stress scenarios and to fund liabilities over the longer term remains well above regulatory requirements. Banks continued to redirect free reserves at the central bank into debt securities, although this trend has slowed. Given significant differences in liquidity surpluses, especially among banks with lower surpluses, careful management of the investment structure is expected. To maintain high resilience, it will be crucial to closely monitor market conditions and maintain the appropriate quality of the liquidity buffer.
Households and non-financial corporations (NFCs) maintain a favourable financial position, but rising international uncertainties are increasing risks to the future resilience of both sectors. Among households, improved consumer confidence and real wage growth have boosted demand for housing and consumer loans, with the latter as a share of GDP already exceeding the euro area average, while overall indebtedness remains low. In connection with these borrowing trends, the fourth thematic box analyses the role of alternative financing for households, highlighting its importance, scope, and potential impact on financial stability. The financial position of NFCs remains stable, with favourable access to funding and low financial leverage. Despite high equity capital and a surplus of commercial credit, the trend of increasing bankruptcies and blocked accounts continues among NFCs, which, together with risks from volatile energy prices and the war in the Middle East, points to the possibility of a deterioration in the financial position of NFCs, especially in energy-intensive sectors. The fifth thematic box, based on a regular survey on access to finance, supplements these findings with companies’ assessments of conditions and access to funding sources.
Conditions in the non-bank financial sector remained favourable last year, but prolonged geopolitical uncertainties could in future be reflected in increased instability through selling pressures on stock exchanges, higher funding costs, and a deterioration in the portfolio quality of leasing companies. The leasing sector recorded stable growth in business volumes and a renewed strengthening of profitability last year, while portfolio quality remained high with a low share of arrears. The insurance segment displays high resilience, as evidenced by growth in gross premiums, increased profits, improved loss ratios, and strong capital adequacy. Despite increased volatility in financial markets, which may be reflected in outflows from funds, domestic mutual funds and stock indices recorded strong growth in asset values in 2025 and early 2026.
Macroprudential policy in Slovenia remains preventive, aimed at ensuring the resilience of the banking system and preventing the accumulation of risks. It remains crucial that existing instruments establish sufficient capital buffers against potential negative shocks, with banks meeting the requirements of the countercyclical capital buffer and the sectoral buffer for exposures to natural persons, while systemically important banks maintain additional buffers. In the area of household lending, measures remain in place to promote sustainable household borrowing, thereby strengthening borrower resilience and reducing banks’ credit risk.