Transcript ТЕМА ДОКЛАДА ИЛИ ПРЕЗЕНТАЦИИ

Financial Sector in Slovakia:
Pillar of Stability
Martin Barto
Sberbank Slovensko, a.s.
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Some historical remarks
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Situation in 90s: Large state-owned banks, on-going privatisation into
hands of domestic “investors“, Asian crisis
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Result: Three largest banks on the verge of bankruptcy, without capital,
almost 50% of non-performing loans, state was the main owner of these
banks
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Solution: Capital strengthening (620m EUR), bail-out (12% HDP),
privatisation
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Lessons learned: Bank supervision to be strengthened, stricter regulation,
role of state is only regulatory and supervisory
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Legal basis: Amendments to Constitution, NBS Law, Banking Law, NBS
by-laws
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Institutional platform: New Banking Supervision Unit in NBS since 2002,
implementing 25 core Basel principles of prudential supervision
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World Bank and IMF were involved through EFSAL loan conditioned by
FSAP (2002, 2006)
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Financial sector during crisis and euro
adoption
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2006: NBS became the sole regulator and supervisor of the financial market
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2007: New organisational structure, where institutions are supervised within
financial groups. Group approach has proved as very efficient.
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High ROE in financial sector in these years, banks above 15%
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Slovak financial sector was only marginally negatively influenced by fall of
some asset prices, most investments into domestic quickly growing economy
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Almost none retail loans denominated in FCY, corporate loans usually
naturally hedged by company receipts from exports
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L/D ratio < 1, no dependence on foreign funding
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Behind this – combination of trustworthy monetary policy (low inflation
expectations) as well as prudent and forward-looking FM supervision
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Financial sector during crisis and euro
adoption
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Slovakia was among few EU member states which did not need to bail-out
any financial institution; although the law was adopted in line with EU
demand
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Other measures were taken:
– NBS decree on liquidity and liquidity management in banks and branches of
foreign banks
– Main shareholders of domestic banks were asked to keep a part of 2008 profits in
bank capital funds
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These measures were meant as prevention against uncontrolled liquidity and
capital outflows to mother companies, some of them were under heavy stress,
applying for a support from their governments
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Fully in line with the first stage of Vienna initiative
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Three negative impacts on banks in 2009: crisis, loss of money market and
exchange transactions with very limited new business opportunities (1/7 of
total operational income) and decrease in assets (10bn €) as a result of the
end of convergence game
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Financial sector during crisis and euro
adoption
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2009 banking sector profit halved in comparison with 2008, some banks
posted red figures
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Insurance companies, voluntary pension funds increased their ROE in 2009;
asset managements ROE went down by 1/3
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NBS stress tests proved a solid resilience of the banking sector despite
combined negative factors, as well as other segments of the financial market
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Stability of the financial system was crucial for all phases of the smooth euro
adoption
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Financial sector at present
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Financial sector remains the pillar of stability of the Slovak economy
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NBS stress analysis (2013) says that at maximum 2% of present bank own
capital should be added in the case the adverse scenarios realise
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Main risks: corporate credit risk, household credit risk
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Other segments: market risks, but impact on economy less important than
banks
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With ECB assuming the supervisory role as home supervisor for 128 main
banks in eurozone, the role of NBS will change partially
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Three largest banks will be supervised directly by ECB, however details are
unknown
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For other banks with mother companies abroad, NBS will be in a role of host
supervisor
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Close co-operation with ECB is expected
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Full responsibility for domestic banks – PB, Prima, Privatbanka, SZRB
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Financial sector at present
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New banking union project underway
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First element: Single Supervision Mechanism was approved by EP and Council
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SSM will directly apply to 128 banks under ECB supervision, it will be binding for
national authorities, ECB will have access to all data
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AQR for those banks - before implementation - includes three parts: supervisory
risk analysis (liquidity, funding, leverage), asset quality review and stress tests resilience
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Recapitalisation needs: 1) markets, 2) national scheme, 3) ESM
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Second element: Single Resolution Mechanism - framework required: Bank
Resolution and Recovery Directive - since 2015, question whether 128 or all ?
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Single Resolution Authority and Single Resolution Fund
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Resolution: 1) shareholders and creditors, 2) resolution fund made up by banks, 3)
fiscal backstop
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Each bank will be obliged to have an adequate loss-absorbing capacity – CRD IV
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Financial sector at present
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Third element: How to finance failures ?
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Resolution Fund created by banks
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More integrated financial market as a shock absorber
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Insurance scheme for tail and unexpected events
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ESM to play the role of public finance backstop - lender of the last resort
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This is a partial answer to the problem of banks too large to fall, single states
unable to rescue them or the price is enormous (IRL)
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Nevertheless, this is not a proper answer to the problem of moral hazard
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Too much regulation and supervision give managements feeling of ultimate
responsibility being with regulator and supervisor
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Existence of SRM, ESF strengthen this feeling
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Conclusion: Even Banking Union cannot exclude bank failures
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