BRATISLAVA, December 5, (WEBNOVINY) — The Slovak banking sector continues to be resistant in spite of the unfavorable situation in the external environment and deteriorating prognosis of development of the Slovak economy. This stems from a report of the National Bank of Slovakia on financial sector stability in the first half of 2011 with reference to the banking sector’s stress tests.
„In particular the estimated ability of banks to generate interest income and profit in crisis conditions, as well as a good starting capital position of the banking sector give a positive signal on the banking sector’s resistance as a whole to unfavorable development,” the central bank states. According to the report, the local banking sector has to calculate with an increase in losses from credits and market risks.
The relatively positive macroeconomic development in the first half of this year supported the financial sector’s stability. The banking sector in the half of the year showed growth in taxed profit, thanks to lower costs of defaulted loans and year-on-year increase in loans to clients. „Despite the banking sector retaining approximately fifty percent of the 2010 profit within its capital, this did not reflect much in the growth of capital adequacy as of July 30, 2011 due to the introduction of two new deductible items and growth in risk weighted assets,” the report further states.
On the whole, the current situation is more serious compared with the period when Lehman Brothers went bankrupt in 2008, the central bank comments. The reason for its is questioned credibility of states during the debt crisis. “The position of several banks as ultimate guarantors of financial stability in events of materialization of unexpected system risks is strongly limited,” the bank states.
The same applies to responsiveness of central banks toward additional support of conditions for economic recovery. According to the central bank, the financial sector depends on its own measures in balances and on its own capital cushion to strengthen its resistance to system risk.
SITA
