The deterioration in the financial situation of some businesses and households, a halt to the trend of excessive growth in housing loans and household debt, plus the issue of bank liquidity and the cost of bank financing are the areas that are most seriously affecting financial stability in Slovakia, according to a Financial Stability Report presented by representatives of Slovakia's Central Bank at a news conference on Monday.
The central theme is inflation and the related growth in interest rates. Despite the rapid changes, the financial sector remains stable, stated the central bank.
Vladimir Dvoracek, Executive Director of its Supervision and Financial Stability Section, said that the deterioration in the financial situation of some businesses and households will result in a worsening of loan-repayment discipline. Some households will be affected by inflation, but the labour market is still relatively resilient. The Slovak Central Bank expects a somewhat greater impact on companies for which uneven influence is a particular problem.
The financial situation for some 17 percent of businesses will deteriorate, and they will find themselves in trouble, but this doesn't mean that 17 percent will fail. "The estimate is that some 8 percent of businesses might theoretically end up in a more difficult situation and insolvency," stated bank’s Financial Stability Department director Marek Licak.
Concerning the loan and real-estate markets, Dvoracek noted that double-digit growth in housing loans has ended. "The steep rise in prices on the real-estate market has come to a halt," he said, adding that business loans are still growing.
Another phenomenon is the issue of liquidity and the structure of banks' resources. "For a long time, we were used to the fact that with the growth in housing loans, bank deposits grew at a high rate as well, chiefly retail ones. However, this trend has halted," said Dvoracek. According to him, bank deposits grew extremely rapidly during the coronavirus-related crisis, while households are now rather striving to protect their savings against inflation.