May 9 (SeeNews) - Slovenia's central bank estimates the credit, interest rate and real estate risks for the banking system to remain elevated although the sector's resilience to shocks stays robust, it said.
"The rise in interest rates has increased the financial burden in parts of the non-banking sector, and the likelihood of a future rise in non-performing exposures at banks is increasing," the central bank said in a Financial Stability Review report on Monday.
The risk to financial stability inherent in the real estate market is assessed as elevated, but has recently declined as growth in residential real estate prices slightly slowed, while demand for housing loans is being reduced by high inflation and the rise in interest rates, the central bank said
The banks’ exposure to interest rate risk increased slightly in the second half of 2022 in the wake of monetary policy measures, and while the risk assessment remained elevated, the outlook is no longer for a further increase, the bank noted
The credit risk assessment also remains elevated on account of the adverse impact of inflation and interest rates on the debt sustainability of debtors, in the non-financial corporations and household portfolios alike, the central bank added.
However, the banking system’s resilience to systemic risks remained high in the liquidity segment. There remain considerable variations from bank to bank in their liquidity surpluses, and with it their capacity to cover the consequences of any realisation of funding risk in the form of a sudden large withdrawal of deposits by the non-banking sector, the central bank said.
At the end of 2022, Slovenia's central bank raised its countercyclical capital buffer for exposures to Slovenia from 0% to 0.5% of the total risk exposure amount.