Title: EU banking regulation on capital and liquidity ten years after the crisis: the Slovenian perspective

Authors: Vilma Hanžel Kratochwill

Addresses: Banka Slovenije, Slovenska 35, 1505 Ljubljana, Slovenia

Abstract: This paper is about the EU banking regulation, which was an important factor in many EU countries contributing to the 2007/2008 financial crisis. Its purpose and value added is to present regulatory weaknesses most relevant for Slovenia. Most notably regarding the absence of rules limiting short-term borrowing on wholesale markets, and procyclical accounting rules which impacted capital adequacy. In the last ten years, the EU banking regulation has been subject to extensive modification. We find the introduction of the Liquidity Coverage Ratio (LCR) was an important improvement. However, the Net Stable Funding Ratio (NSFR) which was designed to address borrowing on wholesale markets is not yet legally binding. Both ratios have a drawback that they may be subject to a cliff effect. Accounting rules were amended with the new accounting standard IFRS 9, but we find that the problem of procyclicality remained.

Keywords: EU banking regulation; financial crisis 2007/2008; liquidity; capital adequacy; accounting; IFRS 9; Slovenia.

DOI: 10.1504/IJDIPE.2020.111022

International Journal of Diplomacy and Economy, 2020 Vol.6 No.2, pp.189 - 203

Received: 21 Apr 2020
Accepted: 17 Aug 2020
Published online: 05 Nov 2020 *

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