Low interest rates and special levy threatens banks’ stability

The financial stability of the Slovak banking sector is threatened by low interest rates, the ongoing fast growth in the indebtedness of Slovak households, as well as a planned extension and two-fold increase in the special bank levy, according to the November Financial Stability Report released by Slovakia's central bank (NBS) on Monday. Banks' profitability has decreased by 5 percent year-on-year, return on their own equity fell from two-digit figures to below 8 percent, and there's a threat of capital outflow that would have an impact on financing the economy, reads the report. The special bank levy should go up to 0.4 percent of the banks' liabilities, lowered by the amount of equity as of next year if MPs pass the bill. "A long-term high level bank levy could cause a drop in lending, which might have a serious impact on the financial sector and thus also on the economy," said Central Bank Board member Vladimir Dvoraček.