The increasing importance of financial stability led to the Bank of Slovenia creating the Financial Stability Department in 2004. The department was renamed in 2014. Its new name, “Financial Stability and Macro-Prudential Policy”, reflects the additional functions that the department has recently assumed. The financial crisis has shown the need for a clearer definition of macro-prudential policy and macro-prudential supervision to mitigate and prevent systemic risk in the financial system. The Macro-Prudential Supervision of the Financial System Act (ZMbNFS) was also adopted in 2013, and governs the status, objectives, tasks, powers and functioning of the Financial Stability Board (FSB), and the manner of macro-prudential supervision in the Republic of Slovenia. It also sets out the tasks, responsibilities, supervisory measures and instruments, and the work of supervisory bodies in the area of macro-prudential supervision. The Bank of Slovenia is one of the macro-prudential supervisory bodies, in the scope of which an FSC Secretariat is also organised.
The purpose of macro-prudential policy is to mitigate the effects of financial cycles and increase the resilience of the financial system to disruptions. Macro-prudential policy identifies, monitors and assesses systemic risks to financial stability, and adopts the requisite measures for the prevention and mitigation of systemic risks. The ultimate objective of macro-prudential policy is to contribute to safeguarding the stability of the entire financial system, including the strengthening of the resilience of the financial system and preventing and decreasing the build-up of systemic risks, thereby ensuring the financial sector’s sustainable contribution to economic growth.
The department systematically collects information affecting financial stability, processes it, analyses it, and presents the findings to the senior management of the Bank of Slovenia and to the public at large. Likewise, it also formulates proposed macro-prudential measures in the area of banking,
The Financial Stability Department’s analytical work focuses on banks, non-banking financial institutions (insurers, investment funds, pension funds, leasing companies), and financial infrastructure. In contrast to the supervisors monitoring individual institutions, the Financial Stability Department analyses the risk exposure of groups of similar financial institutions, the transfer of risk between these groups, and the transfer of risk to other sectors of the national economy (households, corporate sector) and develops macro-prudential instruments that could mitigate or reduce the realisation of certain risks.
At the same time, it also uses macro stress testing to determine the extent to which the Slovenian financial system is resistant to low-probability shocks to which it could be exposed.
The Financial Stability and Macro-Prudential Policy Department draws up, in addition to several internal analysis, two comprehensive analysis each year. Financial Stability Review assesses the stability of the Slovenian financial system as a whole.