Financial statements of the Bank of Slovenia for the year 2008

On 17 March 2009 the Governing Board of the Bank of Slovenia approved the Bank of Slovenia’s audited Financial statements for 2008, presented in compliance with the legal basis for accounting and financial reporting in the European System of Central Banks (the ESCB). 

In its profit and loss account for the year 2008, drawn up in accordance with the Eurosystem’s accounting guidelines, the Bank of Slovenia is disclosing a loss in the amount of EUR 29.7 million. The loss is EUR 6.7 million lower than in the previous year, when the bank joined the euro area and prepared its balance sheet in accordance with the new accounting rules for the first time. These rules in their asymmetric approach define that unrealised losses such as foreign exchange differences and valuations of financial instruments are to be recognised in the profit and loss account, while unrealised gains from foreign exchange differences and valuations are to be disclosed on the revaluation accounts and not be included in the income for the financial year. These gains are realised upon the sale or maturity of the instrument in question. 

The main source of the Bank of Slovenia’s income represents the interest income on its investments in securities and deposits. Claims related to monetary policy instruments also resulted in a significant interest income. Net interest income increased and amounted to EUR 118.4 million (2007: EUR 98.8 million), mainly due to higher interest rates in previous years. 

Realised gains, valuation losses and provisions were negative in the total amount of EUR 123.5 million and are slightly lower comparing to the previous year (2007: EUR -131.0 million). The largest portion of this amount represents the unrealised valuation losses from securities (EUR 119.1 million). The valuation losses resulting from the low market prices of securities are a direct reflection of the financial turmoil and the increased credit spreads on such instruments. 

Net fees, commission and other income stood at EUR 5.5 million in 2008 (2007: EUR 25.7 million). This amount includes provision for covering risks in Eurosystem monetary policy operations. In accordance with the generally accepted accounting principle of prudence, the Governing Council of the ECB decided to create a buffer to cover potential risks, financed by all the national central banks of the Eurosystem in proportion to their shares in the capital of the ECB. As a result of this decision by the Governing Council, the Bank of Slovenia created a provision in the amount of EUR 26.3 million. 

The Bank of Slovenia’s operating costs in 2008 amounted to EUR 30.1 million (2007: EUR 30.0 million). Labour costs increased for 1% comparing to 2007, while material costs decreased for 7%. The bank’s total consumption for costs and investments decreased for EUR 0.3 million as a result of the active monitoring of expenditure and the saving measures introduced. 

The Bank of Slovenia will cover the loss from the general reserves in accordance with Article 51 of the Bank of Slovenia Act. The bank expects the prices of financial instruments to normalise when the financial turmoil eases, what will have an impact on the operating result in the coming years. 

Unrealised gains from foreign exchange differences and securities amounted to EUR 83.2 million in 2008 (2007: EUR 17.7 million). These gains are not included in the current financial result, but are disclosed on the revaluation accounts on the right side of the balance sheet. They can be used exclusively for covering future unrealised valuation losses from individual foreign currencies or securities positions. 

The Bank of Slovenia’s Financial statements for 2008 are due to be published on http://www.bsi.si in May 2009 as part of the Annual report.