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Central Bank Warns Banks 2010 Will Be Even Tougher

Ljubljana, 22 December (STA) - The Slovenian central bank has warned banks that 2010 will be even more challenging than this year as crediting activity continues to stagnate, affecting banks' bottom lines.

In the first ten months of this year banks' pre-tax profit was down 40% year-on-year due to writeoffs and provisions, but profit in 2010 is likely to be even lower, Banka Slovenije said in its monthly bulletin released Tuesday.

The downside risk to income is coupled with greater credit risk, as evident from indicators such as higher delinquency rates, a growing share of non-performing loans and credit risk downgrades.

The central bank warns that banks will have to buffer up capital adequacy ratios to offset growing credit risk. They will also have to cut costs as financing gets more expensive.

The banking system as a whole has retained a solid capital adequacy ratio of 11.6%, which is above the EU average.

However, smaller banks have lower ratios than comparably-sized banks in the EU. These banks will find it hard to secure fresh capital, the report says.

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