The Slovenian banking system is solid, banks are better capitalized than before the economic crisis, they have adopted different business models, and they have fewer unprofitable loans. Also different is the supervising system, and if something was to go wrong, it would be noticed soon, says the Governor of the Bank of Slovenia, Boštjan Vasle in an interview with Delo.
Slovenia is not immune to the economic downturn since it is part of the eurozone, but it remains uncertain how fast and deep the contraction will be. For now we estimate there is a slowdown of eocnomic activity which will remian in most of the Eurozone countries, explains Vasle, who took over the position of the Governor of the Bank of Slovenia three months ago.
Asked by journalist Janez Tomažič what will be the impact of Brexit, Vasle said the greatest risk for Slovenia is connected with a slowdown in international trade, or with restrictions imposed on each other by large global forces. It is a trend that we have not been accustomed to since the Second World War, and this is the greatest risk for Slovenia and the eurozone, emphasises Vasle.
“For us, it is crucial that the financial sector remains stable. The task of the Bank of Slovenia is to contribute to this stability. Problems in one country can also be passed on to other countries. Very quickly this is also reflected in the price of borrowing”, the Governor said. He further explained that the slowdown in the international environment is evident in international trade and in those parts of the economy that are more closely linked to it. We can still, however, talk about high growth rates, as they are at least twice as high as the average growth in the eurozone, he adds.
At the moment, a key challenge for the ECB, where Vasle, together with his colleagues – the central bank governors of other countries – is a member in the institution’s council, is to correctly assess the developments in the economy and what kind of interest rate policy and non-conventional measures should be taken.
Two ways how European banks can become more robust
In the years following the onset of the economic crisis, European banks are in a comparatively weaker condition compared to global, mainly American, banks says Vasle, highlighting weaker business results, unmanageable business models, and partly cyclical factors. The Governor argues there are two ways in which European banks can be made more robust: by merging, which has several obstacles; and secondly, by expanding the banks’ buisness model, which means looking for new products, businesses, and new services. In the future, small banks will survive in the region, but if we want to have a successful banking system, it will be crucial to consolidate or create larger groups that will better shape the European area and not just its smaller segments, Vasle warned.
Are there too many banks in Slovenia? Here, banks compete in a small market that has a small number of businesses and inhabitants says the Governor, who sees the following solutions: “One way for banks to improve business performance is to join up. Thus, banks could benefit from the synergies and advantages of a larger number of customers. The other solution I mentioned earlier butcan also be applied to our banks – new services and faster deployment of new technologies. ”
“Banks are better capitalized than before the outset of the economic crisis, they have different business models, they have fewer unprofitable loans. The supervising system is also quite different than we had before the economic crisis. If something went wrong, it would be noticed much sooner. “
Read the full interview in Slovenian here