The central bank sees 2014 as make-or-break in terms of business model adjustments at banks, which will need to "secure adequate return on capital and appropriate risk evaluation".

However, as not all banks in what is a relatively saturated Slovenian banking market will not be able to make these adjustments, a further consolidation of the banking system is urgent, the board believes.

Future developments will strongly depend on economic recovery and adjustments in the structure of the financing of banks where dependence on short-term and unstable financing on international markets needs to be decreased further and replaced by own and long-term sources, Banka Slovenije wrote.

The central bank moreover again highlighted the high debt level in the real sector, which does not help in efforts to take out loans and boost investments.

The debt and insufficient equity capital make the companies even more sensitive to the crisis and only an increase in equity capital can change this, the board believes, estimating the shortfall at around EUR 5bn.

The central bank on the other hand finds cause for optimism in the situation of households, which have managed to keep debt levels at half of eurozone average and can contribute to recovery with spending.

Turning to the transfer of non-performing loans to the bad bank, the board of governors said that it should help revive lending although transfers conducted below book value will deepen the loss of the banking system. Moreover, the risk of further deterioration remains in case the economy does not recover.