(Repeats story from late Monday)
* Worst scenario sees 2 banks below capital needs
* Dynamics of growth in non-performing loans slows
* Stress tests set over 2010-2011 period
By Martin Santa
BRATISLAVA, Sept 27 (Reuters) - Stress tests showed the
Slovak banking system's strength improved in the first half of
this year, mainly thanks to the sector's stronger capital
position, the central bank said on Monday.
Banks of the euro zone's poorest member state, which adopted
the euro in January 2009, have been shielded from the direct
impact of the global financial crisis, partly due to very small
holdings of toxic assets and small foreign currency borrowings.
"Banks' ability to create profit and their currently
relatively strong capital position proved to be key for
weathering a stress period," the bank wrote in its analysis on
the country's financial sector in the first half of 2010.
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^Analysis to be found on the central bank's website -
http://www.nbs.sk/sk/publikacie/publikacie-nbs/analyzy-slovenskeho-financneho-sektora
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ The National Bank of Slovakia (NBS) conducted its tests
using three scenarios of which the mid-scenario assumed the
economy would shrink by 2.6 percent this year, while the
worst-case scenario implied a 4.6 percent contraction.
In reality, the bank forecasts the economy will expand by
3.7 percent this year, while the government expects 4.0 percent
growth. The NBS will present its updated macro-prognosis on
Tuesday.
The worst-case scenario saw two banks at risk and failing to
meet capital adequacy rules, matching the central bank tests
results published in April, but down from seven in September
2009.
The previous leftist government of Prime Minister Robert
Fico, replaced by a centre-right cabinet of Prime Minister Iveta
Radicova this July, had not had to bail out any of the country's
banks, run by Italian, Austrian, Dutch, Belgian or Hungarian
parent banks.
CREDIT, NON-PERFORMING LOANS RISKS EASE
Credit risk, compared with the situation over the past year,
has eased, mainly thanks to an improving economic situation at
home and abroad, the NBS wrote.
"Credit risk, however, remains the most significant risk
that banks will face," the analysis said.
"Even if we can talk about easing (of credit risk) in the
short-term horizon, current economic development includes
several risks in terms of mid- and long-term outlook," the
analysis showed.
Improving economic growth in the first half of this year
helped to slow dynamics of growth in non-performing loans, but
their share of loans continued to rise, the NBS said.
Volume of non-performing loans of households reached its
peak in the first months of this year, with some banks reporting
a slight decline since.
(Reporting by Martin Santa; editing by Stephen Nisbet)
