Slovak banks should be more cautious in providing retail loans, the central bank (NBS) recommended on Tuesday.
“A very high growth of retail loans continues – one of the highest growth rates in the EU. NBS does not view the fact that loans are growing negatively; nevertheless, it is necessary that these trends are based on a healthy approach and not just on growing competition, which may lead to the accumulation of several risks in the future”, said NBS's Financial Market Supervision department head Vladimír Dvořáček at a press conference in Bratislava. NBS recommends that mortgages covering 90-100 percent of the value of real estate should make up 25 percent of new housing loans at most. In order to stave off defaults, banks also should carry out stress testing of its portfolio vis-a-vis growth of interest rates and unemployment. Another recommendation is that banks shouldn't provide loans with too long maturities. “The maximum recommended maturity for housing loans is 30 years”, said NBS's macro-economic prudence policy department director Marek Ličák, adding that loans with maturity exceeding 30 years shouldn't make up more than 10 percent of a bank's overall credit portfolio. Financial houses should be more careful in examining clients' ability to pay loans, be cautious in loan refinancing and be prudent in providing loans via mediators. Nevertheless, NBS pointed out that the Slovak banking sector remains stable, with a high level of resiliency in terms of external shocks and risks.
