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NBS considers Slovak banking sector stable

THE BANKING sector in Slovakia belongs among the most stable within the eurozone, though the easing of loan standards in the retail lending market poses a potential risk. This stems from the November 2014 Financial Stability Report presented by the Slovak National Bank (NBS), the country’s central bank, on November 25.

THE BANKING sector in Slovakia belongs among the most stable within the eurozone, though the easing of loan standards in the retail lending market poses a potential risk. This stems from the November 2014 Financial Stability Report presented by the Slovak National Bank (NBS), the country’s central bank, on November 25.

According to the NBS, the financial sector in Slovakia benefited in the first eight months of this year from the favourable developments in domestic economy.

“The good news is that the accelerating economic growth was not supported predominantly by foreign trade, the way it used to be in the past; but this time it was fuelled mostly by domestic consumption and investment activities,” said Vladimír Dvořáček, NBS council member and director of the department of the financial market supervision director, as quoted by the TASR newswire.

He continued that the revival was seen in industrial production and on the labour market, where growth in real wages across individual segments was recorded, as well as a drop in unemployment.

“A relatively serene situation on global financial markets also contributed to this, characterised particularly by a mix of growth in assets prices, low volatility and more accessible sources of financing,” he added, as quoted by TASR.

NBS, however, sees potential risks in the partial loosening of lending criteria due to higher competition on the market.

“Banks did not verify whether their clients would be able to make payments on their loans – provided at current low interest rates – also in case of their subsequent rise,” Dvořáček said, adding that this has not yet translated into any significant volume of failed loans.

In terms of the external environment, NBS identified risks in the potential slowdown of economic growth within the eurozone that might lead to another recession. Such unfavourable trends are currently affecting prominent trade partners of Slovakia, including Germany.

“This development is mostly attributed to low domestic demand and also the deepening of geopolitical risks stemming from the conflict in Ukraine,” Dvořáček said.

Source: TASR

Compiled by Radka Minarechová from press reports

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