Slovak banks will have to keep more capital

Banks in Slovakia will be obliged to retain more capital, decided the Board of the National Bank of Slovakia (NBS) on Tuesday. Their obligation will be to increase the counter-cyclical capital buffer rate from the current 1.25% to 1.5% as of August 2019 and subsequently to 2% as of August 2020. This step is a reaction to the dynamic growth in loans, growing household debt, ongoing increases in real estate prices and an overheating labour market in Slovakia. "The main aim of the increase is to strengthen the resilience of banks at a time marked by the ongoing creation of cyclical risks," stated NBS in its explanatory report for the media. In order to retain more capital, the banks will have to trim down their resources by paying less in dividends to shareholders, for example. However, NBS has stated in the past that banks in Slovakia are strong enough in terms of capital, so the buffer increase should not cause them any problems.