The Slovenia Times

Central Bank Promotes Lending


The central bank's board adopted amendments to decisions on capital adequacy of banks and savings banks, amendments to calculation of capital requirement for credit risk under the standardised approach for banks and savings banks, and amendments to credit insurance.

The changes include the extension from three to five years of the period when the bank need not deduct from capital its equity investments in other credit and financial institutions and management companies acquired in the process of financial restructuring. This deduction is currently not used in banks.

Also being implemented is a discretion which will enable parent banks in banking groups to exclude from deductions in capital requirement calculations the investments in institutions which are involved in consolidation. Instead, these investments will be included in the calculation of risk-weighted assets.

Calculations show that this change will improve the capital adequacy ratio for parent banks on an individual basis. Capital adequacy requirements on a consolidated basis remain unchanged for the parent bank, which is key to ensuring the integrity of the capital in the banking group, the central bank said.

Changes also introduce the seal of registration of mortgages as proof of legal certainty for the recognition of real estate collateral.

Procedures for registration of mortgages are according to the central bank still too long, as banks in the period before a final decision on the registration of mortgages cannot consider the real estate as eligible collateral in the calculation of capital requirements for credit risk.

Under the new rules, the basis for the valuation of real estate in the calculation of capital requirements for credit risk will be the generalised market value provided by the Surveying and Mapping Authority (GURS). The option to use the general market value is limited to residential property worth up to EUR 500,000.

The mortgage lending value will no longer be used in determining the value of exposure insured by commercial real estate in Slovenia. The mortgage lending value is the estimated long-term market value of the property, which is difficult to predict in the unstable economic situation and can lead to errors in assessment of the value at the time, the bank added.


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