The activities carried out by the Bank Association of Slovenia – both its employees and the representatives of banks appointed to the Association’s committees and working bodies – were in 2022 still affected by the COVID-19 pandemic. Its negative consequences on the economy were not so harsh as feared at first, but before the situation was stabilised after the pandemic, we had to cope with an energy crisis and upward pressures on costs of energy and raw materials as the effect of the Russian aggression on Ukraine having a bearing on the global and consequently also on the European and Slovenian economy. At the same time, the pandemic accelerated the digitalisation processes as the economic conditions, as the consequences of the Ukraine war, give impetus to the efforts for achieving the strategic objectives in the context of sustainable transition.
The Bank Association provided support to the sector in different areas of operations, including liaising with the relevant institutions on the preparation of measures and their implementation, as well as with the European and national regulatory changes, aligning operational questions and disseminating information to the general public, the population above all, regarding the impact of the sanctions and other circumstances on how financial transactions are executed, in as transparent a form as possible.
Regulatory changes in other areas of the banking sector operations had important influence also on the activities of the Bank Association in the course of 2022 mainly in relation to the following:
- the preparation of the activities aimed at fostering investments environmentally sustainable over a long term,
- the management of risks posed by digitalisation,
- payment systems, and
- cyber security.
The Bank Association continued also in 2022 to strengthen the collaboration with the economy (the chambers of the economy, tourism and small businesses) and the ministries, above all with the Ministry of Finance, the Ministry of Justice, Ministry of the Economy, Administration of the Republic of Slovenia for Public Payments, SI-CERT, Police and the judiciary, as well as with the Institute of Macroeconomic Analysis and Development, Geodetic Institute of Slovenia and other institutions and also with different banking associations in EU Member States.
The cooperation with the representatives of the banking sector within the framework of the European Banking Federation (EBF) was intensified mostly in the areas of strategic importance also for the Slovenian banking system (digitalisation, cyber security, environmentally sustainable financing and bank regulation).
To that end, the Bank Association successfully continued work on the adjustment of its in-house operations and, notwithstanding the necessary investments in adjusting the business processes and carrying out the strategy of gradual overhaul of its IT-architecture, it managed to reduce significantly its overall operating costs.
All operating operational objects set out in the Association’s Programme of Activities for 2022, save for those which, due to their nature and content, feature also in the Programme of Activities for 2023. In 2022, in addition to the realisation of the Programme of Activities, many additional tasks were performed mostly in connection with the activities in the area of the environmental, social in governance factors (the ESG factors) and the implementation of the sanctions imposed in response to the Russian aggression against Ukraine and monitoring their effects on the economy and financial stability.
The activities of the Bank Association were also in 2022 founded on the following strategic objectives:
- financing the real sector, new products and green economy,
- regulation and supervisioln,
- digital transformation, and
- consumer protection.
In the area of reputation building, we were committed to consistent implementation of the communication strategy in all segments from general communication to education and training activities to publishing, in effort to raise reputation and trust in banks and to boost awareness of the significance and knowledge of the area of banking and finance in public, both general and professional.
Within the framework of the activities on building public awareness in the course of 2022, the Bank Association gave a strong impetus to its proactive activities especially when it comes to public awareness of cyber frauds and how to shield themselves against them. We managed to include this topic in the morning programme of Televizija Slovenije. The descriptions of the most frequent cyber and other frauds and tips how to protect oneself against them have been on since autumn 2022 every first Wednesday of a month.
One press conference was scheduled and four were held as shown below:
- in January the topic was the current situation in the banking sector and the impact of the central bank’s macroprudential measures,
- in February after the motion for the constitutional review of the Act on Limitation and Distribution of Currency Risk between Lenders and Borrowers of Swiss Franc Credit (ZOPVTKK) was filed with the Constitutional Court of Republic of Slovenia and the proposal for temporary suspension of that act,
- in May in response to the activities of Zavod KOLEKTIV99 and the Slovenian Consumers Association concerning the application of the EURIBOR interest rate on lending, and
- in November on abuses in the field of electronic operations.
Until the beginning of December, the Bank Association of Slovenia was mentioned, cited or mentioned in as many as 1301 media releases (in the same period a year earlier: 413). It is a noteworthy increase.
In terms of its profile in the media, we can see that the matters communicated by the Bank Association, in addition to the prominent national media, are also published in the local media and thus considerably increasing the visibility of the Bank Association.
On the basis of the analysis made and the statistics kept (positive, neutral or negative publication), we see a continuing gradual rise of the reputation of the banking sector.
In 2022, the overhaul of the website and the extranet started in 2021, was completed.
Also in the education and training area, all the planned objectives were achieved and exceeded both in terms of more e-learning events and putting in place new training programmes and updating the existing ones. The training programmes attracted a record- high number of participants. Moreover, we increased the scope of the activities in relation to financial literacy for the young people and senior citizens, and continued to foster collaboration with the stakeholders in Slovenia and in Europe. The head of Training centra of the Bank Association chaired the European Banking & Financial Services Training Association (EBTN).
Financing the real sector
Our activities carried out in the course of 2022 in the area of corporate financing was mainly focused on the following:
- Assessment and mitigation of the negative impact of the Russian aggression on Ukraine and the ensuing energy crisis on performance of companies in the banking sector,
- Risk management methods and procedures with the emphasis on effective and prudent credit risk management (credit portfolio management against the backdrop of rising uncertainty),
- Integration of the ESG factors in the risk management processes mainly in the field of credit, liquidity and market risks, as well as in credit collateral management, operational risk, portfolio analyses, climate emergency testing and in the preparation of a reference form/template for obtaining data for the evaluation of customers’ ESG profile and the mandatory disclosures.
When addressing the regulatory matters, the focus of the competent Committee was mostly on a proposal for the new EBA’s Guidelines on management of interest rate risk and credit spread risk in the banking book and the appurtenant regulatory technical standards. For the purpose of an in-depth study of the new documents, the Committee appointed a new working group with a permanent mandate – the working group for liquidity, interest rate and market risks.
Among other things, the Committee’s activities comprise:
- Standardising the request for credit approval for small and medium-sized enterprises,
- Polling the representatives of the banks’ risk management departments on the key present and expected risks associated with bank operations,
- Carrying out the banking sector’s initiative for exporting data published on the portal Atlas Voda (Water Atlas) required to fulfil the regulatory requirements for banks in the field of management climate and environmental risks, as well as a number of initiatives for the provision of data on real estate relevant from the environmental angle, from different public data collections,
- Dealing with the issue concerning the implementation of the EBA’s Guidelines on loan origination and monitoring that refer to the procedures relating to management of credit collateral portfolio,
- Discussing climate risk stress tests, mass data processing, ESG factors modelling and modelling liquidity and interest rate risks, a smaller working group of interested members embarked on a joint pilot project: The implementation of the methodology for the calculation of climate-adjusted probability of default in the Slovenian banking system. The project was successfully carried out and its results were delivered to the members – sponsors of the project to be used in practice in the last quarter of 2022,
- Challenges arising from modelling core and stable deposits in the light of liquidity risk and interest rate risk,
- Pooled annual audit reviews of outsourced providers in accordance with the provisions laid down in the EBA Guidelines on outsourcing arrangements,
- Addressing the banks’ readiness to cope with power outage scenarios,
- The proposal for amending the risk management guidelines by adding ESG factors and also added other improvements of the content, in particular in the chapter on interest rate risk management and credit spread risk, in which the expectations arise from the last year’s EBA guidelines on IRRBB and CSRBB,
- Examination the results of the project for the application of the EU taxonomy on the key banking products and the EBF positions in consultation processes in the ESG area (e.g.: the proposal of the Basel Committee for Banking Supervision from “The Principles for the Effective Management and Supervision of Climate-Related Financial Risks” or the Implementing Technical Standards (ITS) on Pillar 3 disclosures on ESG risks),
- Preparation of the reference »ESG-the questionnaire«, prepared in Excel format and divided in four thematic sections with a total of 224 questions,
- Drafting a list of environmental financial data banks will need for disclosures for the financial year 2022 on the basis of the Commission Delegated Regulation (EU) 2021/2178,
- Recommendation for banks to use the PCAF-developed methodology as one of the most authoritative global standards for measuring and disclosing the greenhouse gas emissions associated with their loans and investments and prepared a document based on that standard containing the guidelines for the use of the PCAF standard to account for their financed emissions in practice.
In the field of tax-related matters, the following activities are also worth mentioning:
- Implementation of specific customer identification procedures to obtain information on the country (or more than one country) in which the applicant is a tax resident and transmitting the prescribed data on the applicant and their financial transactions to each of those jurisdictions, and
- Specification of type of income pursuant to tax regulations and the pay-out procedure in the T2S system – uniformity of tax treatment, and the rules on the recognition of interest expenses (Corporate Income Tax Act 2 – ZDDPO-2).
Banking legislation and supervision and legal affairs and compliance
Within the framework of national legislative procedures, we took part, among other things, in drafting comments concerning the following laws (in certain cases sent to the National Assembly Republic of Slovenia as amendments):
- The Prevention of Money Laundering and Terrorist Financing Act (ZPPDFT),
- The act amending the Banking Act (ZBan),
- The new Customer Protection Act (ZVPot),
- The act amending the Act on Financial Operations, Insolvency Procedures and Compulsory Termination (ZFPPIPP),
- The Personal Data Protection Act (ZVOP),
- The Act on the Protection of Whistleblowers (ZZPri) and the Enforcement and Security Act (ZIZ), and
- last but not least, the act amending the Companies Act (ZGD).
- We were also involved in the consultation concerning the proposal Act on Housing Guarantee Scheme for Young People (ZSJSM) and the implementing decree for that act.
In addition, there was a host of the activities carried out in relation to the loans denominated in Swiss Francs, collective damage actions of Zavod Kolektiv99, interpretations of judgements, in particular of ECJ’s Judgment C-383/18 (the so-called Lexitor), with the central bank and the competent ministry we worked on reaching common understanding of cashing debt enforcement instruments (izvršnica), frauds in relation to cashing bills of exchange and abuse of on-line payments, that is, when using digital payment services. The preparatory activities were launched for drafting the so-called fall-back clauses for EURIBOR. The list of indicators to identify suspicious transactions was also prepared.
With the aim to facilitate operations in the uncertain economic environment caused by the Ukraine war and the energy crisis, a draft of a law was prepared in cooperation with the Chamber of Commerce and Industry (GZS) on the guarantee of the Republic of Slovenia for loans to be granted by banks to companies with liquidity problems due to the energy crisis. The proposed law is in conformity with the Temporary Crisis Framework adopted by the European Commission for state aid measures and support to the economy.
Within the framework of the European legislation, the activities at the forefront concerned the following areas:
- Drafting the Regulation on digital identification,
- Reporting on incidents as set out in Network and Information Security Directive 2 (NIS2),
- Proposal for a Regulation of the European Parliament and of the Council on digital operational resilience for the financial sector (DORA),
- Developing a pan-European framework for alignment in case of systemic cyber incidents considering the proposal Regulation on digital operational resilience,
- Consultation concerning the EBA’s Discussion Paper on its preliminary observations on selected payment fraud data under the Payment Services Directive (PSD2),
- Preparing the European draft Cybersecurity Certification Scheme for Cloud Services (EUCS),
- Consultation with the European Commission regarding the Regulation on Cyber Resilience (CRA),
- Preparing the analysis of the cyber security market in the computing field in cloud within the framework of the European Union Agency for Cybersecurity (ENISA),
- The survey conducted by ENISA on the use of cyber insurance,
- Consultation of the Basel Committee on Banking Supervision (BCBS) on prudential treatment of cyptoasset exposures, and
- Consultation within the framework of the Committee for financial Stability on achieving a higher level of convergence in reporting on cyber incidents.
Digital transformation, informatics, cyber security and payment services
The most important activities carried out within the framework of payment services are:
- Activities in relation to the scheduled migration of volumes from the BIPS IKP solution to the BIPS IP solutions. In August 2021, Bankart informed the banks of the current situation regarding the migration of the Bankart technical account from TARGET2 to TIPS for which the European Central Bank (ECB) had granted a derogation enabling to settle in addition to the SCT Inst transactions, also the SCT transactions,
- Carrying out the controls laid down in the Anti-Money Laundering Directive (AMLD), ensuring payment of pension benefits through the IP system and setting up alternative solutions for IP orders processing,
- Adopting the decision to discontinue as of 1 January 2023 the service of controlling the adequacy of the QR-code on the UPNQR form shall be discontinued. The service carried out for the banks by an outsourced provider was pt in place with the aim to provide for the continuity of the high quality of the payment services data at the change-over from the UPN form (with the OCR-line) to the UPNQR form. The data relating to the cleared issuers and licensed printing firms together with the accompanying technical documentation will be published in the future on the public pages of the Bank Association,
- Adopting the decision to upgrade the IzvrsbeXML standard and to sign a contract with the outsourced provider for the second phase of the electronic exchange of decisions on payment enforcement between issuers and banks. A new working group for the project implementation was also appointed in which, alongside the representatives of banks, there were also the representatives of FURS as the biggest issuer of payment enforcement decisions for the purpose of giving impetus to the operational activities involving the outsourced provider,
- In the area of electronic exchange of payment services data with the national authorities the activities continued on launching the data exchange with the Police. The banks performed adequate testing of data exchange through a safe e-mail box, while at the same time, also the activities were carried out for drafting unified instructions, that is, an agreement between the Police and the Bank Association,
- Implementation of the changes to the limit amount in contactless card payments from EUR 25 to EUR 50,
- Harmonisation of the positions the banking community had in relation to the proposal tabled by Banka Slovenije on strong customer authentication (SCA) for card payment transactions within the framework of e-store.
Within the framework of informatics, in addition to the steps taken in the direction of informatics development and security strengthening, we paid attention, among other things, to the activities in relation to the Integrated Reporting Framework (IReF), given the fact that the present statististical integrated framework for reporting would be extended also to reporting on supervision and resolution. Strengthening of the link between the Banks’ Integrated Reporting Dictionary (BIRD) and IReF is also expected. The activity on drafting an ECB regulation on the IReF will follow in 2023.
Within the framework of cyber security so bile in addition to regulatory changes at the European level between the most important topics addressed were:
- The European Payment Council’s initiative regarding the SEPA-wide MISP,
- Sharing information on the forms of fraud,
- Reports on the activities of the working group for cyber security at the EBF,
- Setting up MISP in banks and savings banks for information sharing; four member banks successfully set up data sharing with SI-CERT through the MISP platform and reported on positive experiences and usefulness of the solutions, and the activities will continue also in 2023,
- raising public awareness of cyber frauds.
The collaboration with SI-CERT and the Police was considerably enhanced as well.
The following activities are among our top priorities:
- Digital transformation (digitalisation procedures, enable customer identification using remote access), and
- Consumer data protection (implementation of changes to legislation governing consumer protection, consumer credit and the new developments in the field of payment services) and
- Collaboration with eSeniorji.
The education and training activities should be noted too, particularly those designed to boost financial literacy, those that contribute to a greater knowledge of finance and, in turn, raise the level of security when conducting financial transactions and keep safe in the face of data abuse and frauds.
In addition to report prepared as a tabular overview for the meeting of the Supervisory Board of the Bank Association, there is also a full report with a detailed presentation of the activities carried out in line with the Programme of Activities for 2022.
Mag. Stanislava Zadravec Caprirolo
Director of the Bank Association of Slovenia
Read more: Annual Report 2022