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Macroprudential Commentary – March 2024

Continuing financial cycle downswing

Countercyclical capital buffer rate (CCyB) remains at 1.5%

Snowdrops in the snow

Stabilisation in mortgage lending market

No significant drop in prices of flats

Successful year for banks

In the latter part of 2023 mortgage lending stabilised while growth in loans to firms moderated further

New mortgage lending has been stable for about a year now. By contrast, consumer credit growth has accelerated, largely as a result of higher inflation. Firms’ demand for loans decreased in late 2023, before accelerating in January of this year. Corporate loan growth is now around the EU median. 

Prices of flats have not changed significantly for half a year

Average asking prices for flats in Slovakia have been stable for more than half a year. Prices of new-build flats also remain steady, though sales of these properties are hitting record low levels. Housing affordability is still relatively low.

Banks recorded healthy profits in 2023

Banks in Slovakia increased their profits in 2023 as rising interest rates pushed up their net interest income. Even so, the domestic banking sector’s profitability is on the low side by EU standards. The uptrend in profitability continued in early 2024, but banks’ profit generation is set to be affected by a recently introduced tax on their profits. Banks saw their capital adequacy increase in the latter part of 2023. Their liquidity ratios also improved, amid subdued demand for loans and the regular year-end inflow of retail deposits.

No need to adjust the CCyB rate

The financial cycle has now been in a downswing for six quarters. Cyclical risks are therefore building up more slowly, but nevertheless remain present in banks’ loan portfolios. Meanwhile, there has been no increase in loan defaults, so banks have not had to step up their loan loss provisioning. Their current profit levels provide a sound basis for maintaining a strong capital position.

Also in this edition:
  • What’s behind the financial cycle downswing
  • What’s new in the world of macroprudential policy