Carrying out the Association’s activities, the employees of the Bank Association, as well as the representatives of banks and savings banks (its members) in the committees and their working bodies in 2023, was still influenced by the consequences of the energy crisis and upward pressures on costs of energy, as well as on other commodities as the consequences of the Russian aggression on Ukraine affecting the global, European and the Slovenian economy.
The negative consequences of the energy crisis and the rising inflation did not produce significant direct adverse effects on the operations of the banking system thanks to the balance sheet structure with considerable excess liquidity, but the change to monetary policy by raising interest rates had a positive effect on banks’ operating results in 2023. On the other hand, however, a highly volatile and demotivating legal and fiscal environment adds to reducing competitiveness coupled with the cooling down of the economy. The performance of the banking in 2023 was also conditioned by the consequences of the floods of early August.
Faced with the natural disaster, the Slovenian banking sector responded immediately by taking measures to support the affected population. The first step was to provide for business continuity and assist the affected employees. At the same time, credit institutions provided support for their customers (both private individuals and corporates) by arranging the possibility to defer the payment of outstanding liabilities and also the option to tap bridge financing very quickly.
The disaster response of the members of the Bank Association was to come up promptly with their bespoke special products; they facilitated the procedure, reduced the documentation required when applying for funding, and adopted more favourable interest rates than those on the market, etc. Some of the fast adopted measures are listed below:
- charging no fees on granting a moratorium on loan repayments,
- charging no fees on terminating a term deposit before its pre-set maturity date,
- charging no commission on donations to humanitarian organisations (in addition to the registered ones, also other organisations added to the list, such as, for example, fire brigades, etc.),
- no costs charged on bank statements in the event that records were destroyed,
- applying special procedures in the event that personal identification documents were lost, and
- various other measures designed to facilitate regulating financial issues to customers.
In addition to the above, the Association’s members allocated for direct donations to support the worst hit/injured people in the first two weeks after the floods a total of almost two per cent of the half-year operating results of the whole banking sector.
On top of the measures adopted by the banking sector in support of the borrowers affected in the natural disaster and made available right after 4 August, the Association’s members sent a motion to the government to take into consideration an additional proposal to introduce an additional solidarity contribution paid by the banking sector into a dedicated fund of the Republic of Slovenia to tackle loss and damage caused by the consequences of floods and landslides.
The Bank Association provided support to the banking sector when taking steps to mitigate the consequences of the natural disaster in different areas of their operation, primarily in the area of monitoring the effects of the floods on borrowers, including the support in the course of the preparation of as unified and simplified procedures and applications to defer repayments and the new financial support for customers (legal and natural persons). The support was given in relation to the matters associated with risk management and collateral, conducting payment services on the newly introduced holiday, assistance in managing matters in relation to human resources given the fact that also the people working in the banking sector were affected, and last bit not least, by giving a helping hand through media releases for the public about the measures taken by the banking sector.
Furthermore, the Bank Association drafted and circulated proposals of possible measures designed to mitigate the consequences in the case that those consequences would have systemic effects on borrowers and lenders. Faced with the unexpectedly weak demand for the products serving to remedy damage, the government scheme was not used until the end of 2023, and one of the probable reasons for the lack of interest is most likely attributable to a very good offer of the Association’s members, and explanation could be that the state aid was still not disbursed at that time.
In addition to the activities connected with the August natural disaster, which were running until the end of the year, the Bank Association provided support also to all already scheduled activities in all five strategic areas of work.
The Bank Association continued also in 2023 the collaboration with the economy (Chamber of Commerce and Industry, Chamber of Small Businesses and Crafts, and other associations of employers within the framework of the initiative of the economic circle in which 15 employers’ associations are included), SICERT and Police and judiciary, Institute of Macroeconomic Analysis and Development, Slovenian Surveying and Mapping Authority, Slovenian Environmental Agency and others, and also with various banking associations in other EU Member States.
The role played by the representatives of the Slovenian banking sector within the framework of the European Banking Federation became even more prominent, primarily in the areas of strategic importance also for the Slovenian banking system (digitalisation and cyber security and area of environmentally sustainable financing and in the area of banking regulations).
The Bank Association continued also in 2023 with the successful adjustments of its in-house activities and also had to face unforeseen needs for investments designed to ensure fire safety in the building. In addition, the activities carried out by the Bank Association in 2023 were significantly conditioned by higher costs of materials and services.
It is worth mentioning that all operational goals set in the Programme of Activities for 2023 were completed or, due to the nature and substance, are work in progress, and they are also included in the Programme of Activities for 2024. In addition, during the year under review, a large number of additional tasks were completed, primarily connected with the August floods.
The activities carried out in 2023, once again were focused on achieving the following strategic objectives:
- reputation building,
- financing the real sector, new products, and green economy,
- regulation and supervision,
- digital transformation, and
- consumer protection.
In the area of reputation building, the Bank Association was consistently following the communication strategy in all its segments: from general communication to the activities related to education and training and to publishing, strived for raising the level of understanding of the role of the banking sector in financing the needs of households and economic development. From the conducted analysis and the recorded statistical data, judging by the response scale (positive, neutral, negative), we could see that also in 2023, the growth of professional and objective publications continued.
An important share of the Association’s activities was focused on financial education of different age groups.
Technological development and digitalisation bring numerous benefits, but at the same time, increase exposure to multiple risks. Therefore, with the support of its member institutions, the Bank Association gave a strong impetus in 2023 to the activities aimed at of raising public awareness of cybercrime/online scams and of protecting oneself against them. The cooperation with the national TV broadcaster and carried on with the regular monthly contributions talking about the way to protect oneself against the most frequent forms of cybercrime and other frauds in the programme “Dobro jutro” (Good Morning). The Association’s members also provided additional resources for a special overreaching cyber risk awareness campaign, which according to the results of a public survey, was a significant contribution to making people aware of that type of risk. Moreover, also a special issue of Bančni Vestnik completely dedicated to the area of cyber risks was published.
Also in the area of the education and training activities, all the milestones planned were reached and exceeded, both in terms of a higher number of e-education, and also when it comes to launching new training programmes and updating the existing ones, resulting in a record-high number of participants in hose programmes. As regards the activities associated with raising financial literacy, we enhanced further the cooperation with other stakeholders in the country and in Europe.
In the area of financing the economy and risks management, the activities performed in the course of 2023, were directed, among other things, towards dealing with the consequences of the August floods and the ESG area in the first place. Above all, those activities comprised assessing damage and mitigating the negative impact of the consequences of the August floods on the operations of the affected companies and the banking sector, and the choice of relevant methods and the risk management procedures with the emphasis on efficient and prudent management of credit risk, and also taking steps to ensure as a matter of priority immediate support for the companies to remedy damage after the August floods.
In the area of ESG, the inclusion of the ESG factors in the risk management processes (especially in the area of credit, liquidity and market risks, in credit collateral management by means of the amended form for drafting a summary report on the appraisal of the real estate, operational risk, the portfolio analyses, carrying out testing in emergency climate-related situations) and upgrading the reference form for obtaining data for the assessment of the ESG profile of customers, and the initialisation of the procedures for putting in place technologically more advanced support for the procedure for collecting and analysing the obtained data, sums up the work done in that field.
In the area of banking regulation and supervision, and legal matters and compliance issues, what deserves to be highlighted are the proposals and also the subsequently filed proposals with amendments to the intervention legislation adopted in the wake of the August flooding:
- Act amending the Natural Disaster Recovery Act,
- Act Determining Intervention Measures for Recovery from the Floods and Landslides of August 2023, and
- Act on Reconstruction, Development and Provision of Financial Resources, the latter in the part concerning the legislative provision imposing a temporary tax on total assets of banks and savings banks.
When the law imposing the tax on total assets/balance sheet of banks and savings banks was to be adopted, it was clearly and frequently emphasised as follows:
- that the imposition of a tax on total assets is poised to have long-term negative consequences on lending activity and the banking system resilience,
- that the generated profit contributes to building up additional capital buffer, given the fact that its major share remains in banks and savings banks and, therefore, it is not paid out in the form of dividends, thus preserving their lending capacity,
- that the predictability and stability of the legal and fiscal environment are of key importance for the normal functioning of the economy as a whole, and
- that choosing just one sector of the economy for additional taxation generates uncertainty and is discriminatory.
The European Central Bank (ECB) has also explicitly warned in its Opinion of 2 November 2023 about the application of the draft legislative provision posing risks of negative consequences on lending activity and affecting banks’ retained earnings capacity and competitiveness, as well as the economy as a whole.
In addition, various national legislative and European regulatory changes were examined, and relevant comments were drafted during the year under review.
In the area of EU legislation, the topics at the forefront in 2023 were primarily the issues falling within the scope of digitalisation processes, cybersecurity risks and artificial intelligence and s areas payment services and last but not least, those introduced within the framework of a new »regulatory banking package«. The activities on areas:
The activities running also in 2023 were dealing with the area of loans denominated in Swiss francs and the relevant court judgements and, above all, the Judgement of the Court of Justice C-383/18 (so-called Lexitor); besides, we arrived at common understanding with the central bank and the competent ministry in relation to encashing the debt enforcement instrument (so-called izvršnica) and frauds when encashing bills of exchange, and abuses in the area of online, that is, digital payment services.
Among the more important activities performed by the Bank Association in the course of 2023, were also the activities in the area of collective bargaining, that is, social partnership. In 2023, the activities and the negotiations for signing a new pay rate schedule (the Tariff) started as the validity of the current Tariff was until 31 December 2023 (and it can apply not kore than three months after the expiry date).
In the area of digital transformation/informatics, cyber security and payment services, the collaboration with SI-CERT (Slovenian Computer Emergency Response Team) and the Police continued.
Particular attention was given to the law regulating artificial intelligence in relation to which the members of the European Parliament adopted a negotiating position on 14 June 2023 and held talks un til the end of the year with the EU Member States in the Council with regard to the final version of the legislative act. The Bank Association was invited to participate in the work of the Technical Committee for artificial intelligence at the Slovenian Institute for Standardisation (SIST) on whish a representative of the Bank Association got a seat and thus the banking sector will be able to be actively involved in the preparation of the standards at the EU level, serving to give support in the process of drawing up regulations for artificial intelligence in the EU.
Numerous activities, including the special awareness campaign PAZI.SE, were also dedicated to raising public awareness in the face of risks associated with various online frauds.
The focal topic in the payment services area in 2023 was monitoring of the progress achieved with the migration of volumes from the BIPS IKP solution to the BIPS IP solution, as well as the implementation of the AML controls, ensuring that pensions are paid out through the IP system, and putting in place alternative solutions for processing of IP orders.
Following the adoption of the package of legislative proposals to the Council for combating fraud in the field of value-added tax (VAT), the preparations for the start of reporting of payment data by the payment service providers and the transition to the Central electronic system of payment information (CESOP).
The activities carried out in the area of money and capital market were focused on:
- the work performed within the framework of a special group tasked with the implementation of the Strategy for the development of capital market in Slovenia,
- the work done in the area of the reform of reference interest rates,
- the novelties in connection with the MREL (Minimum Requirement for own funds and Eligible Liabilities),
- the preparedness of the Associations’ members for net interest income (NII) sensitivity limit for the purpose of managing interest rate risk in the banking book,
- banks preparedness for the EMIR Refit 2024, and
- monitoring the ESG portfolios of the member institutions to which their treasury departments dedicate much attention, primarily with a view to with to expanding the roster of new investors,
- the current issues in the areas of the provision of custody/depositary services under the Investment Funds and Management Companies Act (ZISDU-3), Alternative Investment Fund Managers Act/ Act on Forms of Alternative Investment Funds (ZUAIS/ZOAIS), and Pension and Disability Insurance Act (ZPIZ-2), and last but not least
- monitoring documentary operations in the conditions of the Russian-Ukrainian conflict and sanction measures.
In the area of consumer protection, the activities were conducted primarily in relation to the matters connected with the effects of digital transformation (digitalisation of procedures, enabling operations by means of remote access) and the protection of consumers’ data (the implementation of the changes to the legislation governing the area of consumer protection, consumer lending and developments in the area of payment services, cooperation with eSeniorji (e-Seniors), and the issue of physical and electronic accessibility of banking services for vulnerable groups in the society, as well as in connection with the issues related to the provision of custodial services and closure of banks’ branches.
Given the activity it performs, the Bank Association does not have in place any official strategy or policy for the management of environmental factors. Nevertheless, it observes the environment-related factors in all its working processes to the highest extent possible given its own activities, while as to all changes in its working processes, it strives to reduce the consumption of energy, paper and producing waste and waste categorisation. For the purpose of organising work, also the social factors in the area of health and safety at work are taken into account, alongside the provision of adequate and friendly working conditions for employees. The members of the Bank Association have adopted a code of (ethical) conduct the member institutions of follow and the code also applies mutatis mutandi to the conduct of the employees of the Bank Association, that is, it is observed when carrying out the Association’s activities. The activities of financial education and literacy the Bank Association performs in addition to its core activity, is performed free of charge for the benefit of companies.
As already seen in the past, the Bank Association operated in an environment full of challenges also in 2023 and in collaboration with different stakeholders was performing its tasks in a responsive and efficient manner for which I thank you all and in particular I also thank the employees of the Bank Association and all members of the committees and the working groups. Many thanks also go to the providers of alternative dispute resolution for consumer disputes, whose volume and complexity of work has been increasing year on year as the exposure to risk associated with various online frauds.
I also thank the Association’s Supervisory Board for their guidance and support in the realisation of the objectives to ensure effective support to the operations of the banking sector, as well as to provide support for support for the changes in the operating processes of the Bank Association, which as a result of changes in technology development and regulatory changes and shifts in the environment, have to be carried out all the time.