Press relese from the Meeting of the Governing Board of the Bank of Slovenia on June 19, 2012

1) The Governing Board of the Bank of Slovenia discussed the current operations of banks, developments on the capital markets and developments in the area of interest rates.

The banking system’s total assets declined by EUR 200 million to EUR 49.4 billion in April this year. On the liability side, this was primarily the result of a decline in government deposits and debt repayments to the rest of the world. On the asset side, the banks decreased their investments in securities and loans to non-banking sector. Growth in loans to the non-banking sector fell to -4.4%, primarily due to a decline in lending to the non-financial corporations. Household loans fell in April this year, while household deposits at banks increased. Impairment and provisioning costs were up 36% over the first four months of the year compared with the same period last year, while the banks generated a pre-tax loss of EUR 34 million during the same period.

The decline in lending is worrisome in terms of improving the functioning of the banking system and corporate sector. The aforementioned decline is driven by several factors on both the demand and supply sides. To that end, the Governing Board of the Bank of Slovenia expects the banks to accelerate activities aimed at resolving non-performing loans and lending to creditworthy clients. New loans to perspective companies and projects will enable the banks to improve the quality of their investment portfolio. At the same time, the Governing Board of the Bank of Slovenia believes that instruments that can be used by the government to accelerate economic growth should be sought and used in the scope of the Slovenian government's competences in cooperation with the banks. In parallel, those government measures that could encourage long-term savings should also be assessed.