ANNUAL REPORT 2018 Šubičeva ulica 2, SI-1000 Ljubljana
Phone: +386 (0)1 24 29 700 Fax: +386 (0)1 24 29 713 E-mail: [email protected] Website: www.zbs-giz.si
Editor: Aleksandra Žibrat Translation: Vesna Mršič Graphic design: Medprostor
Ljubljana 2019 ISSN 1580-4666 The Bank Association of Slovenia 0 CONTENT
1 Statement by the Chairman of the Supervisory Board 4 2 Introduction 8 3 Bodies of the Bank Association of Slovenia 17 4 Selected macroeconomic data for Slovenia 18 5 Activities of the Bank Association of Slovenia in 2018 19 6 Members of the Bank Association of Slovenia 67 7 Professional team of the Bank Association of Slovenia 68
Annual Report 2018 3 The Bank Association of Slovenia 1 STATEMENT BY THE CHAIRMAN OF THE SUPERVISORY BOARD
Despite uncertainties in the international environment, favourable economic conditions continued in 2018 and had a positive knock-on effect on the Slovenian economy in general and on credit institutions.
As opposed to the previous years, the banking sector lending enjoyed growth in 2018 in all loan segments including corporate loans. Even though consumer loans increased at a hefty rate, Slovenian households remain among the least indebted in comparison with households in other EU Member States. However, due to the fast pace at which consumer loans were rising, the Bank of Slovenia extended in autumn 2018 the macro- prudential recommendation with regard to the credit risk management measures from housing to consumer credit. A comparatively high rate at which the volume of banking business was growing in the course of 2018 was also enjoyed by the leasing business. However, as it was also the case in the previous years, the leasing business grew only in the segment of automotive and equipment financing. Also, in the course of 2018, deposits continued to rise fast particularly in the demand deposit segment due to low interest rates and in the year under review these deposits accounted for more than 70% of all deposits in the banking sector. In the course of 2018, after many years of intense activities, including the joint activities of company restructuring, the share of non-performing loans fell to a level comparable with the European average also in the Slovenian banking system.
The number of member institutions of the Bank Association was reduced during the year under review by one when the leasing company VBS Leasing would up its membership of the Bank Association and more changes took place in the course of the year such as the changes in the ownership structure both in the leasing and in the banking segment, including the change in the shareholding structure of the biggest Slovenian bank and its debut on the stock exchange floor of Ljubljana Stock Exchange and London Stock Exchange. The ownership consolidation process of investment operations in the Slovenian banking sector also maintained momentum in 2018. The revived trading impetus was one of the reasons for the Association’s bid to acquire the authorisation of the Securities Market Agency (ATVP) for conducting examinations of professional knowledge for a stockbroker. The Bank Association met the requirements set out by the Securities Market Agency and acquired the official examiner status in 2018.
We witnessed in the course of the observed year significant regulatory changes that influence the operations of the Association’s member institutions. Alongside the
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changes to the regulations governing the risk management area, there was the impact of the implementation of General Data Protection Regulation (GDPR) with its many requirements, the overhauled accounting standards and the preparations for the implementation of the new Payment Services Directive (PSD2). The revised rules for payment services set out in PSD2 expand inter alia the scope of payment services (payment initiation services and account information services) and payment service providers (so-called third parties for the performance of operational functions). The challenges created by GDPR and PSD2 also place additional burden on transactions with customer forcing the member institutions and the Bank Association during the year under review to dedicate a great portion of their activities to disseminating information to their customers and to consumers in general with regard to personal data protection and security of operations, as well as to enhance co-operation with other associations, institutions and organisations that operate in the area of personal data protection and consumer protection.
All these changes step up the competitiveness of the environment in which credit institutions operate and together with the macroeconomic situation characterised by low interest rates and excess liquidity, as well as the fast pace of technology development and the need to introduce state-of-the-art technologies into operations and digital transformation of services, expose credit institutions to the adverse pressure on interest margins that in the Slovenian banking system remains their primary source of income.
The challenges to bank operations and the necessary and possible strategic changes were the centre stage topics of the discussions at the Supervisory Board meetings during the year under review, including the drafting of the proposals for taking the bespoke measures designed to give impetus to the contribution credit institutions can give to the long-term and sustainable economic development. These proposals were also presented to the Government of the Republic of Slovenia.
The Supervisory Board was closely monitoring throughout the year 2018 the activities carried out in the identified key medium-term priority areas of operation of the Bank Association. In addition to regulatory matters, consumer protection, personal data protection and digital transformation, those activities also comprise the ongoing activities in the area of financing the real sector and green economy, as well as the reputation of banking and financial services that is, communication with the various groups that these activities impact.
In order to deliver on these expectations, the committee tasked with corporate matters came again to the forefront and the co-operation with the Chamber of Commerce and
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Industry was enhanced primarily in the area of lending to the construction sector and raising awareness of the possibility to use the instruments for securing receivables in supplier and sub-contractor chains – the availability to tap into all these resources was brought to attention during the year under review.
Ethical behaviour in financial services as the beacon for bank operations was often on the agenda of the Supervisory Board meetings in 2018 and resulted in the Board’s endorsement of the proposed changes to the Code of Banking Operations, as well as the changes to the composition and the number of members of the committee responsible for handling questions related to conduct standards and standards for businesses by engaging alongside the persons working in credit institutions, also external experts in order to ensure eve more objective and comprehensive handling of any cases of misconduct that would deny public trust in credit institutions that after the financial crisis remains low.
By closely following the responses in the media and reactions of various groups of professional and lay public a gradual improvement in the public perception of the banking sector could be seen. The process of enhancing the standing of the banking industry, as arises from the information stemming from professional monitoring of releases, was not affected even by the particularly aggressive pressures through the media of Združenje Frank (Franc Association) in relation to the proposal to resolve the issue of loans in Swiss Francs by adopting a law on their conversion into euro- denominated loans, since the survey of public opinion revealed that there is no public support for socialisation of any adverse consequences of exchange rate changes and forced retroactive intervention in contractual relationships.
Among the important matters addressed by the Supervisory Board there was also the dialogue with the social partners. In January 2018, the lowest base pays from the pay rate schedule in the annex to the Collective Agreement of the banking sector in the Republic of Slovenia in 2017. At the end of the first quarter of 2018, the social partners signed the agreement to keep the pay rates laid down in the schedule of pay rates from the annex to the Collective Agreement for the banking sector in Slovenia unchanged for the next two-year period (in 2018 and in 2019) as a reflection of the volatility in the environment in which the banking sector continues to operate in the forthcoming medium-term period, since should labour costs increase, credit institutions might find themselves in a situation in which they would not be able to ensure stable conditions for their operations.
At the end of the year 2018 characterised by regulatory challenges and technological changes, as well as by the development and surging competition in the provision
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of financial services, I also thank all the member institutions and the members of the Supervisory Board of the Bank Association, their alternates, the members of the committees and working groups that operate within the framework of the Bank Association, and last but not least to the employees all of whom contributed significantly within the framework of their respective area of work to the efficient operation of the Bank Association and to achieving the set targets.
Blaž Brodnjak, Chairman of the Supervisory Board of the Bank Association of Slovenia
Annual Report 2018 7 The Bank Association of Slovenia 2 INTRODUCTION
The operations of the financial sector and, as a result, the operations of the Bank Association of Slovenia are influenced by the changes in the economic environment at home and across the border, in the regulatory environment, the supervisory priorities and activities, and the development of technology and its impact on consumer behaviour and the operations carried out by the Association’s member institutions. By taking into consideration all these elements, the Supervisory Board of the Bank Association identified and delineated the strategic areas of activity in the forthcoming medium-term period: regulatory and supervisory area, the area of consumer protection and personal data protection but also digital transformation, financing the real sector and green economy and reputation.
As regards the membership of the Bank Association, during the year under review, the number of member institutions fell by one and the term of office of the members of the Supervisory Board of the Bank Association expired. Therefore, the Annual General Meeting elected new members of the Supervisory Board of the Bank Association effective 1 May 2018 for the new term. All changes in the composition of the Board are communicated as soon as practicable.
With the aim to improve effectiveness and efficiency of the Bank Association’s activities in the regulatory area, the education and training area, the preparation of common guidelines, acts and standards for operations of the member institutions and public releases of industry positions in public consultation procedures on professional issues, the Bank Association continued also in the course of 2018 to strengthen the co-operation and dialogue with the ministries and above all with the Ministry of Finance as the ministry responsible for the financial services sector, the Ministry of Economic Development and Technology in the consumer protection area among other issues, the Ministry of Public Administration with regard to the projects for digital transformation, the Ministry of Justice particularly in relation to the area of electronic transactions in debt collection procedures, the Ministry of Labour, Family, Social Affairs and Equal Opportunities and the Social Work Centres Association above all in the area of one-time provision of data in the cases when personal data are to be shared pursuant to relevant legal requirements. In order to ensure transparency and openness and equal access to information for all actors whose decisions have an impact on the business environment, the Bank Association during the year under review presented for the first time to the deputy groups of the National Assembly organised the most pressing matters that fall within the Association’s domain.
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The co-operation with the Bank of Slovenia, that is, with its experts for the areas such as supervision, regulation, reporting and the central credit register has intensified. The Bank Association also fully co-ordinated with other actors: the Slovenian Institute of Auditors, the Chamber of Accounting Services and other institutions.
We should also highlight that in the course of 2018, the Bank Association fully coordinated with the Information Commissioner of the Republic of Slovenia in the area of customer-facing banking operations, consumer protection and personal data protection to ensure that institutions comply with the requirements set out in the General Data Protection Regulation (EU) 2016/679 (“GDPR”). In the area of professional development remarkable work was done within the framework of the project aimed at financial education of young people as the Training Centre of the Bank Association joined forces during the year under review with organisers of the European Money Quiz under the aegis of the European Banking Federation (EBF) for classrooms of students aged 13 to 15 years looking to test their knowledge of finance and monetary issues. In addition, the co-operation with the National Education Institute Slovenia and different economic interest groupings of the financial sector was of paramount importance for the success of the project.
For the work of the Bank Association in representing the interests of the banking sector what also greatly matters in the regulatory area is the integration in the European processes undertaken with the aim to shape such a regulatory environment that will facilitate bank operations and active international co-operation. In the course of 2018, on the basis of the set out medium-term priorities, the Bank Association reviewed the membership of the committees of the European Banking Federation and it is now actively represented through its members sitting on the committees responsible for the following areas: prudential reporting requirements and statistics, accounting, digital transformation and security of operations, strategic supervisory issues and education and training. Moreover, the Bank Association of Slovenia also has a voice in the area of payment services within the framework of the European Payments Council, the Euro Retail Payments Board and Leaseurope as the umbrella organisation of the European leasing activity.
The key areas of focus and the tasks discharged by the Bank Association in the course of 2018 are shown below:
– taking initiatives and drafting proposals to amend current legislation, that is, legislative acts both at the European and at the national level;
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– implementing the GDPR requirements including the preparation and release of a video with information relevant to handling customer data;
– implementing the new accounting standards IFRS 9 – Financial instruments and IFRS 16 – Leases;
– probing credit risks (with the emphasis on compliance with the requirements related to credit risk management (approval process and monitoring) in retail lending transactions, managing loan collateral and intensifying co-operation on the financial disclosure project » FRP Standard «);
– preparing for compliance with the EU-wide AnaCredit reporting project and rationalisation of reporting requirements in general (the rationalisation effort co- ordinated with the Bank of Slovenia reduced significantly the number of mandatory reports requested by the supervisory authority based on national regulations);
– advocating the application of the proportionality principle;
– obtaining official answers from the Financial Administration of the Republic of Slovenia (FURS) to numerous taxation-related questions (e.g. from the field of tax treatment of T2S services, upgrading the eDavki system, tax treatment of financial instruments re-classified at the transition to IFRS 9 from the available-for sale assets, tax treatment of expense for education/training of members supervisory boards, etc.) and the questions asked in relation to reporting in line with the Common Reporting Standard (CRS) and the FATCA requirements;
– appointing the members of a new working group tasked with corporate matters and they drew up a proposal for changes to the Book-Entry Securities Act (Zakon o nemateraliziranih vrednostnih papirjih – ZNVP) in co-operation with the representatives of the Ministry of Finance, the Bank of Slovenia, the Securities Market Agency and the Central Securities Clearing Corporation and specifically in the section that regulates the entry of orders for the transfer of book-entry securities on the basis of court decisions on inheritance into the central register;
– organising in the month of May a gathering with the director of the European Payments Council at which the EPC’s views on the current issues were presented, such as the implementation of the Payment Services Directive, coming to the market of third-party payment service providers, and the kick-start of instant payments;
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– continuing the preparation of new messages for the exchange with the Financial Administration of the Republic of Slovenia and the activities for the scheduled upgrading the eSociala application, as well as the activities for the preparation for e-exchange payment services data with the Police;
– examining the initiative of the Slovenian Chamber of Commerce submitted to the National Payments Council that operates under the aegis of the Bank of Slovenia to increase the amount for contactless payment transactions and preparing the positions for the implementation in the course of 2019.
Another important mission of the Bank Association is the promotion of uniformity in practice, and modernisation and standardisation of operations taken up and pursued by its member institutions (banks and savings banks, and leasing companies), drafting industry-wide standards and solutions, working on the harmonisation of all types of forms and shaping the directions for and the principles of the areas in which the member institutions operate also with the aim to provide for as transparent experience of a financial services user as possible. Some of the principal activities carried out in the course of 2018 by the relevant committees of the Bank Association are outlined below:
– the preparation of the extended list of possible approaches and the methodology to be used when assessing losses arising from credit risks in accordance with the standard IFRS 9 and relevant literature;
– the case study analysis of deviations between the appraised value of residential property and the value established by applying the generalised immoveable property market values evaluated by the Surveying and Mapping Authority of the Republic of Slovenia (GURS);
– the updated list of mandatory audit reviews to be conducted by internal audit function in credit institutions on the basis of the requirements laid down in banking sector regulations, the proposal for a comprehensive internal audit opinion and the starting points for carrying out the internal audit review of the area of the internal model’s application;
– the harmonised proposal for the set of the data for the form for drafting a summary report on real property appraisal and accompanying instructions;
– the harmonised proposal to extend the scope of the information set out in the form for standardised reporting on company financial information;
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– listing the data to be compiled for the calculation of the loss given default – LGD parameter;
– the guidelines for risk management, that is, for determining the risk propensity framework (RAF);
– the presentation for the promotion of trade finance instruments coordinated with the Chamber of Commerce and Industry;
– the Call for Offers for drafting technical specifications for common standardised application programming interfaces API PSD2, that is, the White Paper titled “Programming interfaces for access to the services of issuing payment orders and the services of the provision of information on accounts compliant with the requirements of the new EU payment directive, regulatory technical standard for strong customer authentication and common and secure open standards of communication and the Payment Services, Services of Issuing Electronic Money and Payment Systems Act (Zakon o plačilnih storitvah, storitvah izdajanja elektronskega denarja in plačilnih sistemih – ZPlaSSIED), as well as the selection of the provider for its implementation through the information solution;
– the preparation and release of the new variant, the amended technical documentation of the B2B communication interface of the Bank Association of Slovenia that brings a series of new functionalities such as high availability, the possibility for setting notification/alerts, the possibility for immediate transmission, automated archiving of log entries, the newer form of the algorithm for e-signature (SHA2RSA), and the MS Windows 10 support;
– the completion of the development of the Laurentius application for electronic exchange of judicial documents developed by the Supreme Court of the Republic of Slovenia in co-operation with the banks ready for daily electronic exchange of data related to debt enforcement between the banks and the Supreme Court. Documents in pdf format with xml attachment are distributed to banks through Laurentius that operates as a roadmap (metadata). What matters most is that Laurentius enables two-way communication;
– the kick-start of co-operation with the Ministry of Public Administration with regard to the digital transformation project and co-operation in the course of the preparation of electronic identification and trust services for electronic transactions in the internal market (Zakon o elektronski identifikaciji in storitvah zaupanja – ZEISZ) (Electronic
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Commerce Act) still waiting to be promulgated due to general elections and the election of a new government;
– the Security Forum updated during the year under review the Methodology for valuation of information security situation at the providers of services to banks in accordance with best practice;
– the year 2018 was marked by the implementation of the General Data Protection Regulation (GDPR) and to that end, a form was prepared for customers to grant their consent for purposes of direct marketing and the necessary clarifications in connection with personal data processing for marketing purposes and in co-operation with the PR group also a video clip was released promoting advantages of granting consent for the direct marketing purposes.
The following instructions of non-binding nature were revised:
– The instructions with regard to transmitting confidential data with the accompanying table, and
– The instructions on enforcing judicial decisions for attachment of bank accounts and the accompanying purpose codes.
Of a host of key national legislative procedures, during the year under review, we participated in drafting remarks on the Prevention of Money Laundering and Terrorist Financing Act (Zakon o preprečevanju pranja denarja in financing terorizma – ZPPDFT- 1), the legislative act of the Ministry of Finance and AJPES for enforcing debt collection, the Personal Data Protection Act (Zakon o varstvu osebnih podatkov) and the Central Credit Register Act (Zakon o centralnem kreditnem registru – ZCKR). Furthermore, we were involved in drafting the amendment to change Article 93 of the Building Act (Gradbeni zakon – GZ) and in activities the Ministry of the Environment and Spatial Planning leading to the changes to housing legislation, as well as in the area of lease- sector proposals for making improvements to insolvency legislation.
The Training Centre of the Bank Association organised in 2018 for the members the conferences, gatherings of professionals, conferences, roundtable discussions and professional training programmes in the areas of immediate attention in which banks and leasing companies operate. Professional training was delivered both in traditional forms (as seminars, schools, workshops, expert panels, conferences) and also in the form of e-training. In 69 education and training forms as opposed to 66 carried out in 2017, 38 education/training activities were organised with 2,724 participants attending
Annual Report 2018 13 The Bank Association of Slovenia
243 education/training days, of which 1,069 attendees took part in e-programmes. In the course of 2018, the new, the fourth e-programme for education in the area of GDPR. As in the previous years, the traditional day dedicated to bankers and banking industry attracted most attention and attendance also thanks to the key-note speakers and the representatives of the national and the European institutions, as well as the representatives of credit institutions and also the new “breed” of financial service providers.
During the year under review, the learning material in a script form was prepared for the participants of the 2018 Banking School with the title: »Banking Operations«. The material also comprises all learning objectives that have to be achieved in order to obtain the European Foundation Certificate in Banking and the Bank Association of Slovenia started in 2018 the procedure for the accreditation for education and awarding certificates under the new EBTN standards »Triple E European Foundation Certificate and Banking (Triple E EFCB). On 30 November 2018, the Training Centre of the Bank Association was awarded the accreditation by the European Banking & Financial Services Association.
Among the many novelties in the educational and training activities during the year under review, the Securities Market Agency gave the mandate for stockbroker licence examinations was granted to the Training Centre of the Bank Association of Slovenia instead of the Stock Exchange Members’ Association.
Another novelty introduced into the financial literacy area was the national and the European Money Quiz carried out under coordination by the European Banking Federation. The purpose of the project is to encourage the young to take an interest in banking and financial issues by deploying a modern approach, that is, by using a device to play such as a phone, tablet or a computer. The target group are the young in the 13-15 year-age group. In the national competition on 15 March 2018, 135 students took part. The winner was the Dravlje Primary School that represented Slovenia in the finals held on 7 and 8 May in Brussels. The national quizzes in all the participating European countries were played directly in a live Kahoot! webcast on YouTube.
The EU’s new General Data Protection Regulation (GDPR) demanding new privacy rights and obligations levels of data protection for EU residents has also encroached on the area of work of the Training Centre of the Bank Association; hence during the year under review, we embarked on the overhaul of the business processes and at the same time undertook their digital transformation.
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Bančni Vestnik, the only Slovenian monthly professional publication with the focus of banking and finance, was published in 2018 in 12 issues, of which one is the international edition in the English language. In addition, the Supervisory Board appointed in 2018 the renowned experts to the international Editorial Board of Bančni Vestnik. The development of technology and digitalisation offer the opportunity for Bančni Vestnik to reach much wider readership; therefore, the Supervisory Board endorsed the launch of the digital edition of the journal that should raise its visibility and reach more readers. To that end, a provider of the IT support was selected already in 2018 and the preparations of a technological solution started.
For the execution of the mission of the Bank Association, also the area of communication both with the members and for the needs of its members on the one hand and with the general public is of paramount importance. Therefore, the Bank Association was working strictly along the lines of the Communication Strategy throughout the year. In the course of 2018, we communicated intensely deploying various tools with the professional and general public, with the member institutions of the Bank Association and with the representatives of the media always at disposal to respond to all their inquiries. We were carrying out proactive, as well as reactive communication. Moreover, coupled with the stepping up the intensity of communication with different stakeholders, we also introduced some more modern and more dynamic communication tools, such as the organisation of a round table that was recorded and disseminated through the electronic media, we conducted three public opinion polls, the two key annual conferences were recorded and those videos are available on electronic media, the release of the news for consumers was made even more dynamic also by using video clips – just to mention some of the last year’s activities.
In order to keep the member institutions up to date on all developments, until November of the year under review, 614 documents were released and 29 e-bulletins of the Bank Association of Slovenia – eBilten – on the extranet of the Bank Association, one of the important communication tools for internal communication with the members of the Bank Association.
The statistics of accesses to the Association’s ZBS extranet shows that during period from 1 January 2018 to 22 November 2018, 2377 employees of banks and savings banks accessed the documents via the extranet in comparison with 1975 users during the same period a year earlier.
The interest for video clips introduced in February 2018 indicates that the media responses were in nearly 70% of cases positive or correct and in the observed year in comparison with the year 2017 also applies to the leasing area.
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The areas that involve consumers have been defined as one of the medium-term priorities when it comes to the activities covered by the Bank Association. To that end, the Supervisory Board addressed in the course of 2018 the generic findings of the annual report drawn up by the area for extrajudicial resolution of consumer disputes and adopted appropriate measures, that is, recommendations with the aim to consumers the best possible quality of services.
In the course of 2018, the Bank Association carried out all the set tasks and even went beyond the set targets and for that I thank the employees at the Bank Association and all the members of the committees and the standing technical working groups that operate within the framework of the Bank Association, as well as the mediators of the extrajudicial consumer dispute resolution who have contributed to such outstanding performance with their quality, professional and dedicated work.
I also thank the Supervisory Board of the Bank Association for all guidance and support to achieving the set goals, the tasks that called for considerable technological renovation, as well as the business process re-engineering of the core business of the Bank Association.
Stanislava Zadravec Caprirolo, Director of the Bank Association of Slovenia
16 Annual Report 2018 The Bank Association of Slovenia 3 BODIES OF THE BANK ASSOCIATION OF SLOVENIA
Bodies of the Bank Association of Slovenia: – Annual General Meeting – Supervisory Board – Director: mag. Stanislava Zadravec Caprirolo
Members of the Supervisory Board:1
Chairman of the Supervisory Board Blaž Brodnjak, Nova Ljubljanska banka d. d. Deputy Chairmen of the Supervisory Board mag. Jože Lenič, Abanka d. d. Stefan Vavti, UniCredit Banka Slovenija d. d. Members mag. Sabina Župec Kranjc, Nova Kreditna banka Maribor d. d. Jozef Kausich, Banka Intesa Sanpaolo d. d. David Benedek, Gorenjska banka d. d. Andrej Plos, Banka Sparkasse d. d. Gašpar Ogris-Martič, Sberbank banka d. d. Primorska hranilnica Vipava d. d. mag. Sibil Svilan, SID banka, d. d. mag. Vojka Ravbar, SKB banka d. d. Mitja Otorepec, Summit Leasing Slovenija d. o. o. Alternate Supervisory Board members Andreas Burkhardt, Nova Ljubljanska banka d. d. Matej Golob Matzele, Abanka d. d. mag. Damijan Dolinar, UniCredit Banka Slovenija d. d. Matej Falatov, Nova Kreditna banka Maribor d. d. Igor Kragelj, Banka Intesa Sanpaolo d. d. Mojca Osolnik Videmšek, Gorenjska banka d. d. Thomas Jurkowitsch, Banka Sparkasse d. d. Aleš Zajc, Sberbank banka d. d. Rado Likar, Primorska hranilnica Vipava d. d. Goran Katušin, SID banka, d. d. Manica Novak, SKB banka d. d. Andrej Pucer, NLB Leasing d. o. o.
1 Membership of the Supervisory Board as of 31 December 2018.
Annual Report 2018 17 The Bank Association of Slovenia 4 SELECTED MACROECONOMIC DATA FOR SLOVENIA
2018* 2017 Real GDP growth (in %) 4.5 4.9 Consumer price index, annual inflation rate (in %) 1.4 1.7 Average annual inflation rate (in %) 1.7 1.4 External surplus (EUR millions) 259** 28 Consolidated government debt (EUR millions) 31,157** 31,859 Source: Statistical Office of the Republic of Slovenia, * preliminary estimate, ** data for nine months 2018 total
SELECTED DATA FOR THE SLOVENIAN BANKING SECTOR
(in EUR million) 2018 2017 Total assets 38,777 37,946 Capital 4,726 4,737 Loans to non-banking sector 22,236 21,523 Liabilities to banks 3,193 3,250 Liabilities to non-banking sector 28,979 27,528 Net interest income 671.7 651.9 Gross income 1,153.5 1,074.2 Operating expenses -669.5 -673.7 Profit after tax 496.3 424.8 Source: Monthly information on operations of banks, Bank of Slovenia, March 2019
18 Annual Report 2018 The Bank Association of Slovenia 5 ACTIVITIES OF THE BANK ASSOCIATION OF SLOVENIA IN 2018
In the course of 2018, all strategic objectives set out in the Work Programme were achieved.
When it comes to the operating objectives set for the year 2018, all were carried out except for four (4), of which three could not be realised due to external objective circumstances and one could not be carried out due to lack of human resources. Two (2) objectives were delivered only in part and the work will continue also in 2019. On top of the objectives pencilled in, as many as nineteen (19) additional, unexpected operating tasks were performed. There is a table in Annex 1 listing these activities.
It is also noteworthy that all strategic and operating objectives set out in the Communication Strategy were achieved, as well as all the activities pencilled in within the framework of a gradual upgrading of the outdated IT infrastructure.
A fair share of the work carried out in the course of 2018 consisted of numerous activities connected with the issue of loans denominated in Swiss Francs. Another area of much attention was promoting financial literacy in the young population as a key component of a successful strategy for financial education in general.
The details of the activities laid down in the Programme of Work carried out and completed in the financial year 2018 are touched on for each area in the text below.
ECONOMICS OF BANKING OPERATIONS
The activities carried out during the year under review in the area of the economics of banking operations covering accounting, tax treatment, prudential reporting to regulatory and supervisory authorities, internal audit and risk management matters is constantly monitored by three committees (for accounting, risk management and for internal audit) and by six standing working groups (for collateral, for modelling, for taxes, for reporting, for IFRS and for the regulations governing automated exchange of information on financial accounts (AEOI) and for FATCA requirements) can be best characterised by the following activities:
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– launching of several initiatives and proposals to modify and amend legislation, that is, regulatory acts both at the European and at the national level and resolving any outstanding issues; – implementing the new accounting standards IFRS 9 – Financial instruments and IFRS 16 – Leases; – addressing credit risk (with the emphasis on full compliance with the statutory requirements governing credit risk management (credit approval and monitoring) in retail banking operations, managing loan collateral and intensifying co-operation on the financial disclosure project » FRP Standard «); – preparations to fulfil the requirements for reporting on concluded credit transactions under the »AnaCredit« project and the rationalisation of reporting requirements in general; – efforts to implement the proportionality principle in practice, to a greater extent; – updating the existing documents, that is, drawing up new documents that list internal procedures, effective regulatory rules and best practice cases; – co-ordinating more closely with and pursuing the dialogue with different stakeholders such as, for example, the Bank of Slovenia, that is, its departments in the area of supervision, regulation, reporting and resolution, the Ministry of Finance and the Financial Administration of the Republic of Slovenia, the Slovenian Institute for Audit, the Information Commissioner of the Republic of Slovenia, the Chamber of Accounting Services, the Surveying and Mapping Authority of the Republic of Slovenia, the SI.RISK Association, etc.
Owing to the activities touched on above, the member institutions of the Bank Association of Slovenia now have the following documents at their disposal: (a) the updated list of possible approaches and methodologies for assessing losses from credit risk in accordance with the international financial reporting standard IFRS 9 and the relevant literature, (b) a case study analysis of deviations from the determination of residential property value calculated on the basis of the generalised immoveable property market values as appraised by the Surveying and Mapping Authority of the Republic of Slovenia (GURS); (c) the updated list of the reviews internal audit functions in banks have to conduct on the basis of the requirements laid down in the bank regulations, the chart for a comprehensive internal audit opinion and the starting points for conducting internal audit reviews of the internal model application area, (d) the harmonised proposal for the set of the data to be entered in the form for the preparation of a summary report on real property appraisal and the accompanying instructions, (e) the offer in writing for the preparation of an analysis of/report on the Slovenian real estate market, (f) the results of the analyses and surveys concerning the current bank exposure to risks drawn up by the Slovenian and foreign institutions complemented by the surveys conducted by the Risk Committee and of the Internal
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Audit Committee, (g) the aligned proposal for the expansion of the information displayed in the form for standardised reporting of company financial information, (h) the list of the data to be provided for the calculation of the parameter for loss given default (LGD), (i) the expert opinion provided by the external adviser on the tax treatment of costs associated with credit process, (j) the official responses of the Financial Administration of the Republic of Slovenia (FURS) to a myriad of tax-related questions (e.g. from the area of the tax treatment of the T2S services, the upgrading of the eDavki tax return system, the tax treatment of financial instruments that with the implementation of the new standard IFRS 9 were re-classified from the assets available for sale, the tax treatment of the expenses incurred on professional training of members of supervisory boards, etc.) and the questions regarding reporting under the CRS standard and in line with the FATCA requirements), k) the renewed content of the website of the Bank Association of Slovenia covering the topics of reporting under FATCA and automated exchange of information on financial accounts (CRS), l) the guidelines for risk appetite framework – the area in which also the Association’s members were active participants.
Throughout the year under review, the member institutions made their voices heard through the Bank Association of Slovenia (in particular their motions to the Accounting Committee and the Risk Committee) and by coming forward with worthwhile and well- reasoned proposals and positions of the banking industry they played a proactive role in the consultation processes on legislative acts issued by the national and international authorities. To ensure that our members have a voice in the discussions to improve legislation, we presented proposals related to the contemplated modifications and/or amendments to certain new regulatory products introduced in the course of 2018 by the following authorities: – EBA (the guidelines on reporting requirements regarding FINREP, on management of non-performing and forborne exposures, on outsourcing arrangements); – ECB (Guide to internal capital adequacy assessment process(ICAAP) and Guide to the internal liquidity adequacy assessment process (ILAAP)); – Bank of Slovenia (Regulation on reporting by monetary financial institutions for the purpose of including reporting requirements from the ECB Regulation on the collection of granular credit and credit risk data – AnaCredit, Guidelines for the calculation of the rate of default and the rate of loss, Guidelines on risk appetite practices for banks); – National Assembly (Building Act).
The Association’s members received timely information also about other consultation processes, that is, about the proposed legislative changes or publications of new texts of regulatory acts.
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In the area of the implementation of the international financial reporting standard IFRS 9 – Financial instruments effective for the reporting periods starting on 1 January 2018, we continued to collect questions and work out dilemmas of the member institutions also in the first year of its implementation, even though we started the preparations for its adoption well in advance. We tracked the interpretations provided by the competent authorities and passed on information to our members, we discussed the topic at professional gatherings and examined the proposals for approaches and methodologies deployed for assessing expected credit losses provisioning. Two specialised task forces set up within the framework of the Accounting Committee and the Risk Committee dealt with how an entity should classify and measure financial assets and financial liabilities and with the recognition of impairment. The held 11 meetings at which they addressed concrete and specific questions that arise from on ground implementation of the requirements set out in the standard and held the presentations of possible solutions. Regarding the international financial reporting standard IFRS 16 – Leases, effective for annual reporting periods beginning on 1 January 2019 and introducing changes with impact on financial statements in particular of companies that have numerous lease contracts in their portfolio (lessees), a host of questions about the effects of the standard on bank leases were dealt with. Furthermore, two bespoke presentations were organised for the members of the Committee for Corporates and the Risk Committee with suggestions on how to tackle the effects the new standard has on companies’ financial statements.
Credit risk management was again an area of much attention with a strong emphasis on the implementation of the requirements stemming from the provisions of the Consumer Credit Act (Zakon o potrošniških kreditih) and the Central Credit Register Act (Zakon o centralnem kreditnem registru) and transmitting data on lending transactions to the information exchange system – SISBON. A survey was conducted with the aim to get a feedback from the professional public on the use of the early warning system that collects and analyses large amounts of data to identify whether retail clients are exposed to potential risks. The member institutions also stepped up their engagement in carrying out the project titled: »FRP Standard - Financial Disclosure Procedure«. The objective of the project is to set standardised financial information on enterprises to be used for a credit analysis and loan granting decision in order to facilitate the process of granting loans a proposal was prepared to amend the standard form for reporting by adding more information recognised as being relevant and useful in the analysis of applicants’ credit standing. In the area of collateral management, the Working Group members agreed on and finalised the content of the form for the summary report on real property appraisal, prepared the accompanying instructions and presented them to the Slovenian Institute of Auditors. The set of the data relating to the vinculation of insurance policies was presented to insurance companies within
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the framework of the initiative for exchanging information by electronic channels using the B2B communication interface of the Bank Association of Slovenia. In addition, the Bank Association of Slovenia obtained the offer for the preparation of a report on the Slovenian real estate market – the subject matter of an in-depth evaluation at the beginning of 2019.
In connection with the AnaCredit, a project to set up a dataset containing detailed information on individual bank loans in the euro area conceived to deliver the collection of granular credit and credit risk data (“AnaCredit” stands for analytical credit datasets), that is, serving to enable the ECB on the basis of Regulation (EU) 2016/867 of May 2016 (ECB/2016/13) to collect granular credit and credit risk data at the financial sector level of the euro area through national central banks, Eurosystem NCBs, during the year under review the representatives of the Bank of Slovenia and the member institutions of the Bank Association of Slovenia, that is, the members of the Accounting Committee and the working group for reporting met on six occasions. At those meetings they sought through constructive discussions most optimal possibilities for carrying out the reporting requirements, and, at the same time, reasonable changes were proposed in order to ensure rationalisation of the ever- increasing reporting obligations in the following ways: by simplifying the procedures for reporting (including tapping directly into all public records and registers by the Bank of Slovenia), aligning the national reporting obligations with the EU-wide ones, finding a common denominator for the statistical and supervisory reporting requirements and defining the adequate dataset architecture of the Bank of Slovenia in co-operation with the members of the Bank Association of Slovenia.
The Bank Association of Slovenia was an active participant during 2018 in the initiative launched by numerous banking associations from the EU Member States demanding that the derogations granted by NCBs under the proportionality principle of the reporting obligations should be specified in more detail in the revised Capital Requirements Regulation (CRR) and the Capital Requirements Directive (CRD), in particular when it comes to reporting obligations and disclosures. By ensuring the proportionality of the reporting obligations by granting derogations to small reporting agents, the standards of prudential requirements would remain unaffected, whereas the reporting burden would be decreased by taking into account the institution size, risk profile and product sophistication, in particular for smaller and less complex banks. The proposal was presented at the meetings with the representatives of the European Commission in Brussels, the Ministry of Finance and the Bank of Slovenia.
The committees and the working groups updated the documents that touched on the their respective field of work (as an example, the check-list for reporting for the
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area of automated exchange of information on financial accounts (Common Reporting Standard – CRS was brought up-to-date), the list of the key topics addressed in the annual report on the work of internal audit department, the list of statutory internal audit reviews, the survey with regard to current risks in the banking sector) and preparing new lists (e.g. listing the data for purpose of the calculation of the LGD parameter). As a result, the Association’s members obtained the updated overview of the selected fundamental information and of the essential first steps of the operating procedures – a highly useful toolkit in their work.
Within the framework of the co-operation with the Ministry of Finance, that is, the Financial Administration of the Republic of Slovenia, the Bank of Slovenia and other key stakeholders, we made sure that the Association’s members received up-to-the- minute information about their activities and plans for the future, we coordinated the procedures for submitting initiatives in the area of banking and tax legislation, we procured relevant information and interpretations, organised meetings and participated in in joint projects, such as, for example, the already mentioned management of the framework serving to determine propensity to assuming risks – RAF and the FRP Standard - Financial Disclosure Procedures. To that end the appointed representatives of the member institutions held in the course of 2018 several meetings with the representatives of the aforementioned institutions at various levels and the specialists from those institutions delivered presentations and workshops in the organisation of the Bank Association tailored to the needs of the member institutions.
In addition to the above activities, the Bank Association of Slovenia organised three conferences during the year under review each lasting two days with the economics of banking operations as a key area of focus. Moreover, the members of the committees and the co-ordinator of the Bank Association of Slovenia published numerous articles in Bančni Vestnik covering hot topics.
CORPORATE BANKING
Two committees covered the area of corporate banking during the year under review: the committee tasked with corporate operations that resumed work after a period of inactivity and the committee whose immediate area of attention are trade finance products: documentary credits and collections and bank guarantees. An outline of the key tasks, that is, the activities executed by the members of both committees is set out below.
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C o r p o r at e B a n k i n g C o m m i t t e e the Committee tasked with corporate banking issues re-launched its activity in August 2018 after a period of inactivity and held its 4th regular meeting against a backdrop of redefined operating models and developing technology and people capabilities so as to be able to compete in the changed financial industry landscape.
Within the framework of its activities, the Committee prepared the positions for amending the guidelines for responsible lending planned to include also the issues from the project financing area and be released in the first quarter of 2019. In addition, the Committee members discussed a comprehensive presentation of the range of the products offered by SID banka and the co-operation between the banks and the Slovenian Enterprise Fund, a public fund for financial support to Slovenian SMEs, and they also thoroughly examined the expected effect the new accounting model introduced under IFRS 16 on companies’ financial statements. At all the Committee meetings the key characteristics of the construction sector were discussed, as well as the main challenges and risks associated with financing the construction sector for economic actors from the entire chain (e.g. sub-contractors, suppliers…). To examine all facets of that issue, a mixed working group was established with the aim to provide a cross-section of the situation in that segment of the economy and thus enable the Committee to identify actions serving to curb the risks inherent in the construction sector and to draft proposals for appropriate systemic measures.
D o c u m e n ta ry O p e r at i o n s C o m m i t t e e In the course of 2018, the central stage task entrusted to the members of the Committee for documentary credits and collections was once again the exchange of experience, specialist knowledge and best practices, as well as keeping abreast with the key regulations, trends and new developments in the area of documentary operations, that is, trade finance in general.
Within that framework, the Committee members looked into numerous current issues that emerge both at the operational and at the tactical level in daily operations. In the area of compliance and prevention of money laundering and terrorist financing the risks inherent in business transactions carried out with certain countries and performing controls were addressed in co-operation with the Compliance Committee. The members of the Committee followed closely during 2018 the terms and conditions of calls for tenders for the award of public contracts with regard to the tender guarantee texts prescribed by contracting authorities and a meeting was also held with the representatives of the International Chamber of Commerce (ICC) for Slovenia to discuss relevant issues. Moreover, the Committee addressed to the Financial
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Administration of the Republic of Slovenia (FURS) the questions in connection with the text of customs guarantees that cause considerable difficulties and entail risks and received additional clarifications in writing from FURS.
The Committee was also active in the international field. Its members participated in the activities of the bodies of the International Chamber of Commerce (ICC), mainly in the work of the its body responsible for banking technique and practice (the ICC Banking Commission) and came on board of the ad hoc working groups appointed to cover specific working areas of the ICC. The representatives of the Committee attended the meetings of the ICC Banking Commission and laid a report before the Association’s members to present the plan of work of that body in the future, the course of its activities and progress achieved in specialised working groups, as well as the decisions taken by the Banking Commission concerning answers given by experts to the questions addressed by the banks and national committees to the ICC Banking Commission.
Alongside the traditional resolution of cases that fall within the scope of Uniform Rules for documentary banking instruments and formulating official opinions regarding professional, that is technical questions of banks and economic agents, the Committee’s expert group examined a case of disagreement with the beneficiary, that is, advising bank and released its expert opinion, whereas the Bank Association of Slovenia followed up on the Committee’s initiative by bringing to the attention of the competent authorities the identified unfair, that is, disloyal advertising practice. In co-operation with the Slovenian Chamber of Trade and Industry, the Committee prepared a presentation for the promotion of the trade finance instruments provided by banks and presented the instruments within the framework of the Banking School set up under the umbrella of the Bank Association of Slovenia. At the same time, the preparation for the organisation of a conference on trade finance bank operations continued and the event is expected to take place in May 2019.
With information and monthly bulletins of Commercial Crime Services, a division of the ICC Company, of which the Bank Association of Slovenia is a member, the Committee received warnings about international frauds in the area of documentary instruments and highlighted the risk inherent in documentary instruments – domestic and international ones.
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MONEY AND CAPITAL MARKETS
T r e a s u ry C o m m i t t e e The Committee’s key area of focus during the year under review was the co-ordination of the activities undertaken with the aim to provide for a timely action to deliver efficient liquidity management across the banking system between the credit institutions – members of the Treasury Committee, the representatives of the Bank of Slovenia and the representatives of the Ministry of Finance. The customary practice of sending invitations to a representative of the Bank of Slovenia by the banking operations departments and the systemic supervision and regulation and to a representative of the Ministry of Finance by the Directorate for Treasury to co-operate was assessed as efficient and became the routine way of the Committee’s work. The bulk of the proposed topics for discussion sent in advance was connected with the current information divulged by the representatives of the Bank of Slovenia in relation to the changes in regulations, monetary policy measures and information shared by the Ministry of Finance in relation to government borrowing.
On many occasions, the members of the Treasury Committee emphasised above all the workload as a result of reporting obligations banks have to fulfil in order to be compliant with the requirements laid down by the Bank of Slovenia, as well as by the European Central Bank. To streamline the reporting requirements assessed as being a considerable burden on banks’ resources, both the Bank Association and its member institutions worked on a list of statutory reports in effort to identify possibilities for rationalisation.
When it comes to the professional and regulatory topics, the stress tests and supervisory treatment of exposures to certain counties should be mentioned as noteworthy. The Committee members also discussed at their meetings the consequences of Brexit and the application of the UK legislation in the future, as well as the activities in connection with the transition away from the Euro Interbank Offered Rate (Euribor) benchmark rates, that is, the introduction of alternative reference rates.
Furthermore, the Committee played a proactive role in the activities carried out by the working group tasked with the matters relating to Directive (EU) 2014/65/EU on markets in financial instruments (MiFID II) combining the members of all three committees boasting expertise in money and capital markets. In addition to the experts from the Treasury Committee the new working group includes also the experts from the Committee tasked with the back office and fiduciary matters and those from the Committee for investment services. The result of those activities was that in the
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course of 2018, a number of dilemmas were identified and passed on to the Securities Market Agency to get answers.
The contribution of the Committee’s members to the work on the preparation of the topics and the material for the programme of the conference that gathered together officers in treasury, back-office, depositary, custody and investment banking offices is also noteworthy. The event was held in September with the process automation of financial markets as the keynote topic with focus on coping with uncertainty that comes along with changing the way credit institutions work.
C o m m i t t e e f o r b ac k o f f i c e , d e p o s i ta ry a n d f i d u c i a ry s e rv i c e s At their meetings, the members of the Committee shared information about the activities connected with the back-office functions that fall within the province of work of the financial markets and the custodian and depositary responsibilities for securities. The permanent item on the agenda of the Committee meetings concerned the reports on the work of the competent working groups and namely the working group for fiduciary and depositary under the Investment Funds and Management Companies Act (ZISDU) and the working group for European Market Infrastructure Regulation – EMIR. Following the migration of the international corporate governance from the province of work of the Association of the Stock-Exchange Members to the competence of the Bank Association of Slovenia a new working group was set up tasked with the implementation of the corporate governance requirements and practices.
The working group for fiduciary and depositary matters attended in the first quarter of 2018 the regular annual meeting with the representatives of the Securities Market Agency where the reorganisation of the work of the Securities Market Agency was presented, as well as the newly created Funds Department responsible for all duties and tasks related to the issuance of licenses and approvals in accordance with the provisions of regulations governing investment funds and mutual pension funds, supervision of the operations of these entities operating under those regulations and participation in the drafting laws, bylaws and opinions in the field of investment and mutual pension funds. There is more work to be done to be in line with the European guidelines in the area of monetary funds and to that end, the Agency endorsed the working group’s initiative for the organisation of a training seminar for pension fund managers from the area affected by the amendments to the changes to the Investment Funds and Management Companies Act (ZISDU) and, as a consequence, depositary contracts;
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Within the framework of the working group for European Market Infrastructure Regulation (EMIR), the issues on the table ranged from the enquiry by the Securities Market Agency with regard to the EMIR reporting to the impact of Brexit on clearing and reporting on the latest information in connection with EMIR Refit and EMIR 2.2.
The newly appointed working group for corporate governance fully co-ordinated with the representatives of the Ministry of Finance, the Bank of Slovenia, the Securities Market Agency and the securities clearing company (KDD) prepared a proposal to amend the Book-entry Act (Zakon o nemateraliziranih vrednostnih papirjih) and namely in the section regulating order entry for the transfer of book-entry securities on the basis of a court decision on inheritance into the central register.
The president of the Committee who is also the representative of the Bank Association in the Post-Trading Working Group at the European Banking Federation, informed the Committee members about the developments at the European level and brought to the fore the fact that the members of the Working Group are wary of the impact Brexit is expected to have on operations, primarily when it comes to the central clearing firms (central counterparties).
The Committee together with the Treasury Committee and the Investment Services Committee actively took part in the preparation of the topics and the material for the two-day joint conference carried out in the second half of September 2018.
I n v e s t m e n t S e rv i c e s C o m m i t t e e In the course of 2018, the Committee members met at one regular meeting and within the framework of that meeting, they learned about the activities, that is, the procedures for the promulgation of the Financial Instruments Market Act (Zakon o trgu finačnih instrumentov) presented to the Committee members by the representative of the Securities Market Agency. The consolidation of the providers operating on the investment services market, the issue was raised at the end of 2018 whether to continue with the activities within the framework of the existing committee, or to address the matters which already at that moment were largely overlapping with the issues on the table of the Committee responsible for back-office and depositary matters within the framework of the working group that operates within the framework of the aforementioned committee.
Despite that dilemma, the members of the Committee spared no effort during the year 2018 to be active participants in the working group for new legislative framework will strengthen investor protection and improve the functioning of financial markets under the Markets in Financial Instruments Directive (MiFID II) tasked with keep abreast of
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the developments leading to the implementation of that new legislative framework in the national legislation. At the same time, the working group members participated in the preparation of the proposals for the topics to be covered at the two-day conference of officers working in treasury, back office, depositary and investment banking departments.
PAYMENT SERVICES AND SEPA PROJECT
P ay m e n t S e rv i c e s C o m m i t t e e During the year under review, the members of the Payment Services Committee met at four regular meetings and cast votes in two correspondence sessions. The first point of the agenda of those meetings of the Committee members in 2018 was the presentation of a report on the progress of the activities going on the area of instant payments, systems and services within the framework of SIMP and the e-invoice system (E-račun) delivered by Bankart, a company specialised in processing modern payment instruments with the observer status alongside the representatives of the Bank of Slovenia and the Public Payments Administration of the Republic of Slovenia at the Committee meetings.
In the first quarter of 2018, the Committee endorsed the common remarks made by the member institutions of the Bank Association concerning the legal framework for the BIPS payment system, that is, providing solutions for processing instant payments at Bankart. The members of the Committee were also informed about the TIPS (TARGET Instant Payment Settlement), that is, putting in place a pan-European underlying market infrastructure for instant payments processing. Further to that matter, two presentations were made in the form of a workshop delivered by the company SIA the first company in Slovenia certified as a network service provider for access to TIPS and SWIFT and a potential provider of network services. Within the framework of the working group for SEPA Credit Transfer that also has a mandate for regulating issues related to instant payments, the activities on the preparation of the content of the recommendations for booking instant payments were already launched.
In May 2018, the representatives of the committee and other members of the Bank Association met with the director of the European Payments Council (EPC) and heard about the activities going on under the auspices of the EPC and his role in the Euro Retail Payments Board (ERPB). At the gathering, the EPC’s views on the latest issues as the implementation of the Payment Services Directive, the arrival of third providers
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of payment services, and the introduction of instant payments were presented to the Committee members.
During the year under review, the Committee dedicated a great chunk of its activities to the co-operation with the Informatics Committee in the course of the preparation and adoption of the technical standard for API/PDS2, that is, the White Paper that is compliant with the Payment Services Directive, EBA regulatory technical standards and the provisions of payment services and the services of issuing electronic money, and the Payment Systems Act.
Within the framework of the working group tasked with the transmission of payment services data to the government authorities, the Committee continued with the preparation of new messages to be exchanged with the Financial Administration of the Republic of Slovenia (FURS), took part in the activities serving to eventually upgrade the application eSociala and launched the activities on the preparation of e-exchange of payment services data with the Police.
On the basis of the proposal of the Card Operations Committee, a comprehensive analysis was performed with the aim to explore the possibility of merging the two committees into one body. In the final phase, that is, when the members cast their votes, the motion did not get sufficient support. Nevertheless, during the year 2018, the members of the two committees reach an agreement on the scope and content of a two-day joint conference on the topic of payment services and card operations. On that occasion, Open Banking where customers can choose new financial products and services from providers was presented. In a world of apps and website, exclusivity of the bank-customer relationship is fast disappearing as bank customers can give their consent to third-party providers of payment services. Within the framework of the conference programme, the focus of attention was also on the implementation of instant payments and mobile payments offered by banks, as well as the solutions for the execution of e-payments offered by non-bank providers, alongside further development of non-cash payment transactions where the possibilities introduced by PSD2, that is, Payment Services, Services of Issuing Electronic Money and Payment Systems Act (ZPlaSSIED) have to be taken into consideration.
C a r d O p e r at i o n s C o m m i t t e e The activities carried out by the Card Operations Committee during the year under review were largely focused to the initiative to raise the limit on contactless transactions given by the Slovenian Chamber of Commerce within the framework of the National Payments Council at the Bank of Slovenia. With regard to that proposal, both card processors – MasterCard and Visa – were approached and asked to share
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their view, which they did and endorsed the initiative. Furthermore, all members of the Bank Association were asked to share their position regarding the limit and the proposal got their practically unanimous support. The Committee approached eventually also the Consumer Association of Slovenia for opinion and their proposed was to start by analysing the use of contactless payments and identify any abuse both in Slovenia and also in other EU Member States. On the basis of all the results of those analyses that demonstrated that contactless technology does not entail any higher risks for users, the initiative to raise the limit was finally confirmed by the banks at the Committee meeting held in October.
In co-operation with the Police, the Committee successfully carried out the one-day event on card fraud attended also by the representatives of Europol and Hungarian Criminal Police and a proposal was given to enhance the co-operation between the law enforcement and the card schemes in the area of knowledge and information flows.
The Committee members continued also in 2018 to examine on a regular basis the documents drawn up within the framework of the European Payments Council and the Euro Retail Payments Board. Together with the representatives of the Payment Services Committee and the Training Centre of the Bank Association of Slovenia, the Committee members prepared a two-day event on payment services and card operations, within the framework of which the highlighted topics included digitalisation of business processes in banks and the need to make bank customers aware of potential risks, predominately in relation to personal data protection.
In the second half of 2018, a new working group was established within the framework of the Committee tasked with reporting on incidents and frauds under PSD2 that necessitates that the conditions are first created for the preparation of input data for reporting purposes.
Raising risk awareness in relation to card-based operations and co-operation in the course of the preparation of answers to the questions asked by journalists and reporters concerning the card operations became the Committee’s standing task.
SWif t C o m m i t t e e The traditional annual meeting with the representative of the Society for Worldwide Interbank Financial Telecommunication (SWIFT) for Slovenia arrived from the office of SWIFT Austria in Vienna to meet with the members of the SWIFT Committee in March 2018. The focus of attention was once again on cyber security in the SWIFT network and SWIFT’s Customer Security Programme (CSP). The Slovenian
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audience also learned about SWIFT new launch of the Global Payments Innovation Initiative (GPII) that improves cross-border payments across the correspondent banking network. Moreover, the news of the implementation of the SWIFT messaging solution for instant payments was shared at the meeting as SWIFT was laying the ground to provide services for cross-border availability for instant payments.
During the year, the members of the Committee also learned about the results of the survey conducted with the aim to get a feedback to the migration of the SWIFT FIN standards to ISO 20022. The results of the survey show that most users approved the gradual approach to migration and the actual kick-start in 2021.
Other activities carried out within the framework of the president referred to keeping the Committee members posted on a regular basis by the chairman of the Committee who attended Swift International Banking Operations Seminar – SIBOS 2018 in Sydney where a number of highly interesting topics were presented. Those topics are of vital interest for most banks in Slovenia and range from the future of the payment infrastructure, the migration of SWIFT FIN to ISO 20022, and SWIFT Customer Security Programme to aligning with the compliance requirements by means of the SWIFT services and last bit not least, instant payments.
INFORMATICS
As regards the work in the area of informatics during the year under review, it is noteworthy that we wrapped up all the tasks scheduled in the programme of work for 2018, save for drafting the Service Level Agreement (SLA) for service in the cloud. The tasks we carried out and the list of the meetings held can be seen in separate tables enclosed to this report on the activities discharged by the Bank Association of Slovenia for the year 2018; hence we focus attention in the rest of our annual account on the tasks we carried out in addition to those pencilled in the annual programme of work. During the year under review, the Committee members convened only one meeting with physical presence but were engaged all year in the activities that required quick responses by communicating with each through. The keynote activities and their outcome either carried out completely by the Informatics Committee in the course of 2018 or in which the Committee members were proactive actors are outlined in the text below in paragraphs dedicated to each activity.
The preparation of a uniform standard for technical specification API PSD2, that is, White Paper on application programming interfaces for access standardised payment services requests and the account information services compliant with the
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requirements set out in the EU revised payment services directive, regulatory technical standard for strong customer authentication and common and secure open standards of communication and with the provisions of the Payment Services, Services of Issuing Electronic Money and Payment Systems Act and the selection of the provider for their implementation through IT solution. The original purpose of putting in place a uniform API standard was that all banks and savings banks that operate in Slovenia provide their services through a uniform API in order to lay the groundwork for pursuing directly the objective of converging the standards for communication across the European landscape, enable a simpler and single access to their TPP services, and by joining forces to act in harmony enable easier management and control of risks where regulation is silent.
The publication of a new variant, amending the technical documentation for the ZBS B2B – the Bank Association of Slovenia B2B communication interface that bring along a number of new functionalities such as a high availability level, the option of setting alerts, the possibility of immediate data transmission, automated archiving of log entries, a newer form of the algorithm for electronic signing – e-podpis (SHA2RSA), and support for MS Windows 10. The package to be downloaded with the supporting documentation for the Association’s ZBS B2B communication interface is published on the website of the Bank Association at: http://www.zbs-giz.si/zdruzenje-bank. asp?StructureId=1200. During the year under review, the Committee continued its efforts undertaken with the aim to conscript as many institutions and partners of the member institutions of the Bank Association of Slovenia as users of the universal B2B communication interface the Bank Association. The result of these efforts was that the exchange of the data related to financial disclosures of company operations will run between the Association of Accountant Services and the members of the Bank Association of Slovenia will be running through the ZBS B2B communication interface. Furthermore, through the ZBS interface information will be exchanged also concerning the data on vinculation of insurance documents between the interested insurance companies and banks. Throughout the year, the working group for eStandards was also providing technical assistance to the entities required to report under the U.S. Foreign Account Tax Compliance Act (FATCA) and the Common Reporting Standards (CRS) with the interface settings.
The completion of testing and the development of the Laurentius application, developed by the Supreme Court of the Republic of Slovenia in co-operation with banks. It uses the existing open source technologies for exchanging electronic documents and data with Slovenian courts and is prepared to go live for electronic exchange of data on debt collection based on judicial enforcement decisions. Banks distribute through
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Laurentius pdf documents with xml attachments in the path function (metadata). It is worth mentioning that Laurentius enables two-way communication.
Co-operation in the course of the preparation of the analysis of the effect on personal data protection, which is a basis for amending the act governing the central credit register, by means of which automated access to the SISBON records and automated procedure for granting low-value loans by the member institutions of the Bank Association of Slovenia would be enabled. We managed to complete the analysis in the course of 2018 after a myriad of iterations with the Bank of Slovenia and the Information Commissioner; nevertheless, no changes to the legislation have been made so far.
The revival of the project for the rationalisation of reporting to the Bank of Slovenia was launched during the year under review on the basis of the letter sent to the Bank of Slovenia in October 2018 in which the Informatics Committee gave the initiative for setting up a quality data warehouse at the Bank of Slovenia from which the Bank of Slovenia would generate reports for different purposes and asked that the activities in the area of rationalisation, that is, optimisation of the reporting framework be continued to the benefit of all stakeholders. On that basis there was a meeting between the representatives of the Bank Association of Slovenia and the Bank of Slovenia in November at which the representatives of banks raised voice for the reporting procedures to be facilitated and streamlined (including direct use of all records and registers accessible to the general public by the Bank of Slovenia), aligning the local reporting requirements with the European ones, identifying a common denominator for the statistical and supervisory reporting obligations and defining the adequate Bank of Slovenia data architecture in co-operation with the members of the Bank Association of Slovenia. At the end of the meeting, the participants agreed on three conclusions and namely: – the Bank of Slovenia will take steps already in the early stage of the process to verify the possibility for direct mining of data from the registers available to the public that under the present arrangements must be reported by each bank individually, – the Bank of Slovenia will check on the portal for submitting reports if there is a possibility to prescribe that the owner of the digital certificate in a bank and the owner of the report that submitted the report shall be separate entities, and – the Bank of Slovenia will supply the banks and savings banks with up-to-date information regarding the status of the BIRD and IReF development projects.
The fresh impetus given to the relations with the Ministry of Public Administration in the field of the digitalisation projects and the co-operation in the course of the preparation of the law governing electronic identification and trust services for
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electronic transactions in the internal market – ZEISZ (Electronic Commerce Act). However, the promulgation of the new law was side-tracked pending the election of a new government. The new law transposes into the Slovenian Environment Regulation (EU) No 910/2014 of the European Parliament and of the Council of 23 July 2014 on electronic identification and trust services for electronic transactions in the internal market (the eIDAS Regulation). What will be of considerable relevance to the banking sector is electronic identity and how the law treats it since it must be compliant with the eIDAS Regulation and ensure cross-border authentication. Being aware of the importance of those issues for the banking sector, during the discussions with the Ministry of Public Administration we advocated the position in favour of the issuance and the provision of an identification means in electronic form, that is, on electronic data media and the issuance of electronic identification means shall be entirely in the domain of the state. What also matters is that by virtue of that law, electronic customer identification is allowed without physical presence of the customer in a bank. The members of the Committee got together with the representatives of the Ministry of Public Administration during the year under review at two meetings. At the meeting held in January, the framework for the new law regulating electronic identification and trust services for electronic transactions, the central building blocks of the e-public administration (e-uprava) and setting up a hybrid cloud for the services provided to the public and the private sector were presented. The representatives of the Ministry of Public Administration presented SI-CAS (Slovenian Central Authentication System) and SI-PASS – a service for login via the Internet and the electronic signature (e-podpis), at the meeting held on 23 March 2018. Moreover, the Ministry of Public Administration invited us in 2018 to take part in the work of the interdepartmental working group for the preparation of a draft decree on designation of essential services and operators of essential services and detailed methodology for designation of essential services. The decree refers to Article 6 and Article 7 of the Information Security Act (Zakon o informacijski varnosti – ZInfV) and designates the providers of essential services and the methodology used to designate them.
During the year under review, the work of the Informatics Committee also encompassed the activities serving to exchange information, experience and views regarding the development of bank information technology and keeping abreast of the developments in legislation and standards governing that area. With regard to the fact that around the globe information security is one of the lead themes in the area of informatics, the Committee members dedicated special attention to keeping up-to-date with cyber security standards and related legislation.
An important and on-going task of the Security Forum operating within the framework of the Informatics Committee during the year under review was the exchange of
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information and experiences in the area of information security. Furthermore, the responsibilities of the Security Forum comprised keeping track of the changes to the national and EU legislation and standards that fall within the area of information security. The Security Forum updated in the course of 2018 the Methodology for evaluation of information security status at the providers of services for banks in accordance with best practice and a straightforward and detailed questionnaire and took part in the activity of the working group dealing with the issues connected with payments security within the framework of the Bank of Slovenia. The Security Forum also worked on drafting amendments to the security questionnaire dealing with ATM settlement and with the Bank of Slovenia prepared a proposal to amend the Regulation governing internal governance, management body and the process for the assessment of internal capital assessment for banks and savings banks. In October 2018, the European month of cyber security, a meeting took place between the representatives of the National Response Centre for Cyber Security (SI-CERT) and security engineers at banks and savings banks.
The Security Forum continued the co-operation in the area of exchanging information related to cyber frauds and other abuses with the Police and the Slovenian National Cyber Security Incident Response Centre Si-Cert. The information for notifying the public with regard to fraudulent messages that misled the recipients to effect payments were also prepared.
PR AND PUBLISHING ACTIVITIES
Within the framework of the publishing activity, we released in April the electronic version of the Annual Report of the Bank Association of Slovenia for the financial year 2018. Within the framework of the PR activities of the Bank Association, we consistently carried out all year long the Communication Strategy and reported on a regular basis on the performance and the results of those activities at every meeting of the committee tasked with strategic issues and to the Supervisory Board of the Bank Association. We prepared a detailed report for the year 2018. What matters most in handling communication-related issues is for the Bank Association of Slovenia to act consistently in effort to achieve the objectives set out in the Communication Strategy and, to that end, to observe the identified values of communication. In the course of 2018, we intensely communicated by deploying various means and tools of communication both with professional and general public, with the member institutions of the Bank Association and with the representatives of the media, and we responded to all their requests without unnecessary delay. We engaged in proactive, as well as in reactive communication. The communication concerning mainstream
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themes and findings exchanged with the professional public and the members of the Bank Association of Slovenia can be followed through the topics summed up in eBilten (electronic bulletin) released by the Bank Association of Slovenia and circulated every week to the staff of the Association’s members.
The key communications activities carried out in the course of 2018 are listed below: – The Bank Association of Slovenia prepared and released on the website open to general public 44 public notices in 2018.
– Thanks to the synergistic effects of all three communication pillars of the Bank Association of Slovenia, we prepared 15 notices for public and contributions for the journal Bančni Vestnik from the events, meetings and conferences organised by the Bank Association.
– We prepared an operating communications plan for each event organised by the Banking Association by including different professional areas of the Bank Association of Slovenia and the representatives of external institutions.
– We provided for live broadcasting of the Banking Conference and the Slovenian Bankers Day via the Internet. The broadcasting of the Slovenian Bankers Day was watched by a 200-strong audience – an enviable number according to the experience and opinion of the service provider. On the livestream platform, the Slovenian Bankers Day had more than 1100 views and on the Facebook platform 800 more.
– All the leading media reported fairly on the messages and conclusions of the Banking Conference and the Slovenian Bankers Day.
– In line with the proactive communication with the public, we prepared ten public notices in co-operation the experts from banks for the users of bank services with the focus on safe use of bank services and the news from the area of banking operations.
– We responded to the current developments and gave answers to each and every question of journalists in 22 published notices that in 2018 mostly referred the loans denominated in Swiss Francs and in March mostly revolved around financial education of the young.
– In connection with the issue of the loans denominated in Swiss Francs, at the end of January we held a press conference with the authors of the position paper that probes the issue from the angle of the legal and economics profession that was given space in all leading media. The press conference was carefully planned in advance and to
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that end a series of meetings took place both with the professional staff of the Bank Association of Slovenia and with external collaborators.
– In February we participated in the TV show “Speaking Openly on Loans in Swiss Francs” and appeared on three occasions in the TV show “Code”.
– With the Slovenian Press Agency STA, we organised at the end of March a round table with the loans in Swiss Francs as the topic.
– We presented to the parliamentary groups the arguments of the Bank Association of Slovenia against the adoption of the law on loans in Swiss Francs.
– Two opinion polls were conducted asking for opinions regarding the loans in Swiss Francs.
– An opinion poll was conducted with regard to the proposed amendments to the Central Credit Register Act.
– To support the activities related to financial education, we created two new headers on the website of the Bank Association of Slovenia open to the public “For Kids” and “For Parents”.
– We published the material and interactive module with exercises for testing financial literacy.
– We released the information referring to the European Money Quiz.
– From the clipping we got in February 2018 it arises that from February to November 2018, the Bank Association was mentioned in 330 media publications (174 internet, 48 press agency, 89 printed media, 11 radio, 8 TV). In January we monitored the appearances manually (see the annex).
– From the web clipping it arises that the Bank Association was mentioned 620 times from January to November in contributions published on the Internet with the 67 percent share of positive comments.
– The statistics of accesses to the public website of the Bank Association of Slovenia shows that in the period from January to November 2018, the website of the Bank Association of Slovenia was visited by 27,289 visitors as opposed to 26,419 in the same period a year earlier.
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– On the extranet of the Bank Association that represents one of the most important communication tools for internal communication with the member institutions of the Bank Association of Slovenia, we released 614 documents until November 2018.
– We prepared 29 bulletins – ZBS eBilten.
– The statistics of accesses to the extranet of the Bank Association of Slovenia shows that in the period from 1 January 2018 to 22 November 2018, 2377 employees in banks and savings banks accessed the documents via the extranet as opposed to 1975 users in the same period a year earlier.
SOCIAL PARTNERSHIP
One of the most important issues that in 2018 absorbed a significant portion of the Bank Association’s time and energy was undoubtedly the area of collective bargaining, that is, social partnership.
In January 2018, the amounts of the lowest base pays from the appendix to the Collective Agreement of the banking sector in the Republic of Slovenia (KPDb) with the rates of pay were increased and namely considering the official inflation rate in the preceding year.
The collective bargaining started in autumn 2017 for a new pay rates schedule for the years 2018 and 2019 continued also during the year under review. The Supervisory Board of the Bank Association discussed at several meetings the issue of the expiry of the effectiveness of the pay rates from the appendix to the Collective Agreement of the banking sector and in connection with that the conclusion of a new schedule with pay rates resulting in the negotiating team of the Bank Association of Slovenia rejecting the proposals of the trade unions and any potential compromise solutions, and repeatedly proposed concluding a new pay rates schedule with the same text as the existing one. The new pay rates schedule was signed in March 2018 and was also published in the middle of April in the Official Gazette of the Republic of Slovenia.
C o m m i t t e e f o r t h e C o l l e c t i v e A g r e e m e n t o f t h e b a n k i n g s e c t o r The Committee tasked with the issues relating to the Collective Agreement of the banking sector did not hold any meetings during the year under review. The most important activities, however, were carried on and entrusted to the negotiating
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team of the Bank Association. The member institutions and the members of the Committee were addressing the current issues all year long by correspondence and were exchanging opinions and hands-on experience with regard to concrete matters.
C o m m i t t e e f o r t h e interpretation o f t h e C o l l e c t i v e A g r e e m e n t o f t h e b a n k i n g s e c t o r In March 2018, the Committee for the interpretation of the Collective Agreement of the banking sector got its president, that is, the parties to the collective agreement concurred that Miha Sotlar, Attorney-at-Law, shall become the Committee’s president. The Committee met shortly afterwards in March and endorsed the Rules of Procedure on the work of the Committee and examined the questions received but without adopting any explanations but only agreed on the technical answers to be given to those that enquired about certain matters. The Committee met in November once again and, in addition to other issues on the table, provided the definition of the term »the sole caretaker of a child«. During the year under review, the Committee for monitoring the enforcement of the Collective Agreement of the banking sector did not hold any meeting.
LEGAL MATTERS AND COMPLIANCE
The experts engaged in the area of legal matters took care of convening the ordinary annual general meeting, several ordinary and extraordinary meetings of the Supervisory Board of the Bank Association, the meetings of the Committee for Legal Matters and of the Committee for Collective Agreement of the banking sector, as well as numerous meetings of the working groups of the aforementioned committees. The area of legal matters provided assistance to the Compliance Committee and to the Committee for money-laundering prevention and their working groups. The experts working in the area of legal matters carried out in 2018 the preparations for holding the meeting of the committee for ethical conduct.
In co-operation with the banks and savings banks, we prepared in 2018 a series of initiatives for modifications and amendments to legislation addressed to the competent ministry and to the Bank of Slovenia and keep abreast with the latest in various segments of the legal area that were at the forefront during the year. In connection with the enforcement of debt collection decisions we drafted and addressed to the competent institutions concrete proposals for resolving the problems identified in practice. We participated in drafting remarks regarding the Prevention of Money Laundering and Terrorist Financing Act, the secondary legislation acts of the Ministry
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of Finance and the Agency of the Republic of Slovenia for Public Legal Records and Related Services (AJPES) for debt collection issues, the Personal Data Protection Act and the Central Credit Register Act. Furthermore, we were involved in the preparation of the amendments to change Article 93 of the Building Act and in the activities of the Ministry of the Environment and Spatial Planning focused on the changes to housing legislation, and specifically, in connection with the issue of opening a transaction account (TRR) for a community of owners of apartments in multi-dwelling buildings and functioning of that community in the future – the issue raised within the framework of the preparations for modifications and amendments to housing legislation by the aforementioned ministry.
On top of all that, we took part in numerous activities carried out within the framework of other areas and these activities are described in more detail under respective headings. The activities worth noting in particular stemmed from the new General Data Protection Regulation (GDPR), then the activities in connection with the issue of automated decision-making on granting loans and similar banking services without the participation of a bank employee, the activities with regard to the loans denominated in Swiss Francs when for the interested member institutions we commissioned and obtained the opinion that takes into consideration the constitutional-legal and economic aspects. The purpose of commissioning such an opinion was to get the argumentation in case that an intervention law on the conversion of loans in Swiss Francs into euro-denominated loans would get support in the National Assembly but also to have grounds when it comes to individual cases. In connection with that issue, we co-ordinated a number of related activities and also participated in certain media activities in that regard.
Within the framework of the working groups of the Committee, the relevant recommended instructions were revised and specifically the Instructions with regard to the transmission of confidential data with the accompanying table and the Instructions for the enforcement of the debt collection decisions at banks and the accompanying purpose codes list. The Instructions regarding the procedure and manner of collecting debt on the basis of an enforcement draft (izvršnica) from the payment service providers was not revised in 2018, since there was no need to do so. Several committees and working groups were engaged in examining the issue of the deadlines for keeping data and documentation by taking into consideration the provisions laid down in Article 129 of the Prevention of Money Laundering and Terrorist Financing (ZPPDFT-1), since the interpretations and the opinions provided by the relevant competent institutions opened new practical dilemmas. These activities continue also in the year 2019.
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We were included in the work on the co-ordination for the preparation of the workshop serving to facilitate the implementation of the EBA guidelines on outsourcing to cloud service providers alongside the preparations of the conference and the seminar with regard to risk appetite practices for banks or RAF (in relation to the draft Guidelines on the establishment and implementation of the framework for the propensity to assume risks in banks and savings banks).
In the course of 2018, the Code of Banking Practice was amended at the Annual General Meeting of the Bank Association following the motion made by the Committee for Strategic Issues and the Supervisory Board. In line with the modifications and amendments the committee tasked with business ethics was established as a standing body that will probe into the implementation of the provisions of the Code among the member institutions in the future. The committee has a mandate to assess on the basis of filed complaints the cases of non-compliance or violation of its provisions and to adopt adequate measures.
With the year 2018, the membership of the leasing company VBS Leasing in the Bank Association was terminated and no new applications for membership arrived. Further to this point, it is worth mentioning that as of 1 May 2018, the new Supervisory Board was elected for a four-year term of office with some new and some re-elected members. Mr. Blaž Brodnjak once again was voted for the position of the Chairman of the Supervisory Board for the new term with Mr. Stefan Vavti and Mr. Jože Lenič as deputies.
The area for legal matters together with other stakeholders formulated the programmes for the theme conferences of legal professionals, HR experts, anti-money laundering specialists and compliance officers for the year 2018.
There are also other internal activities carried out in 2018 that are worth mentioning such as, for example, the co-operation on aligning operations with the new General Data Protection Regulation and the overhaul of the IT system of the Bank Association (a video clip and drafting the privacy policy of the Bank Association in line with General Data Protection Regulation), co-operation in the activities carried out in relation to the call for tenders for the providers of APIs under PSD2 and for the digital transformation of Bančni Vestnik, co-operation with the Chamber of Commerce and Industry of Slovenia with regard to joining the International Chamber of Commerce, revising selected internal rules and handling the legal issues in connection with the employment relations within the framework of the Bank Association, co-operation in drafting a formal framework for the migration of professional training for stockbrokers to the Training Centre of the Bank Association of Slovenia and the education and training
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activities conducted within the framework of the EBTN, then the issue of reporting to the SISBON system (in real time/with immediate effect) and working hand-in-hand with the owners of other activities running in different areas of the activities pursued by the Bank Association.
C o m m i t t e e f o r l e ga l m at t e r s The Committee members addressed at its meetings a number of important issues in connection with the specific legal and formal matters.
A significant amount of time was dedicated to the issues raised by adopting the new Building Act and, specifically, its Article 93. In this regard, the Bank Association obtained clarifications from the Ministry of the Environment and Spatial Planning, which were then passed on to the banks. A letter was addressed to the competent committee of the National Assembly of the Republic of Slovenia in which the Association endorsed on behalf of its members the initiative of the National Assembly of the Republic of Slovenia to modify the concerned article and, in addition, the Association lodged its amendment. Given the fact that the proposed amended legislation did not get sufficient support, we sent to the Ministry of the Environment and Spatial Planning the proposals to change Article 93 and solicited the Ministry to draft the act amending the current act as soon as practicable, so as to facilitate the work of the Association’s members in practice. These activities remain on the table also in 2019.
The members of the Committee also discussed the position of the Information Commissioner and the letter of the Health Insurance Institute of Slovenia (ZZZS) according to which there is no legal basis for the ZZZS to furnish to the banks any personal data of the insured persons from its records on the basis of a consent contained in the loan contract. Moreover, the activities undertaken with the aim to set up a system for automated, that is, computer-based approval of loans and similar bank services without involvement of a bank loan officer continued in 2018 (automated data processing, linking personal data collections).
Furthermore, the Committee examined the issues concerning the period of time during which the personal data should be stored and took into consideration the opinions of the Office for the Prevention of Money Laundering and the Information Commissioner referring to life subsistence and similar arrangements in connection with notarial deeds, touched on the difficulties in collecting the dues from other countries and the order to freeze a debtor’s bank account. The views on competence in disputes arising out of consumer relationships and with regard to tender bonds in the electronic public procurement procedures were also exchanged. In addition, the Committee members took note at the meetings of the issue of enforcing judicial decisions related to instant
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payments and discussed the letter of the Bank of Slovenia informing the concerned entities that a violation notification system was put in place.
Working within the framework of the Committee, the working group tasked with drafting the recommendations contained in the instructions for the enforcement of judicial decisions at banks was busy year-round updating several times the text of the instructions and also participated in amending the list with codes for payment purpose in the area of payment transactions.
The working group for drafting the recommendations laid down in the instructions on sharing confidential data was also engaged in monitoring changes to relevant legislation and revised the aforementioned instructions. Any and all modifications and amendments made were always laid before the Committee for approval.
The Committee members discussed the motion of the core working group for tax- related matters with regard to the tax treatment of debt enforcement expenditure incurred by levying the VAT charge. Furthermore, the Committee members also took note of the information that a new overnight reference interest rate will be developed to replace the benchmarks such as the Euro Interbank Offered Rate (Euribor) and Euro Overnight Index Average (Eonia). The transition to alternative reference rates is also planned for Libor. In connection with that issue, a letter was prepared and sent to the Ministry of Finance. In addition, the Committee also looked into the motion to strike off the second paragraph of Article 17 of the Rules on the procedure for out-of- court resolution of consumer disputes (release summaries of mediator opinions on the website of the Bank Association) and the initiative in connection with the change to the SISBON Rules with regard to “unambiguous identification” of customers.
It is also noteworthy that at the meetings of the Committee its members exchanged experiences in connection with the issue of the loans denominated in Swiss Francs and the themes for the annual conference of legal experts were identified. As requested by the Supervisory Board, the Committee looked into certain conspicuous practices in the area of out-of-court resolution of consumer disputes and adopted a stance vis-à-vis the issue in question based on the explanation provided by the mediator in the dispute.
In the course of 2018, the members of the Committee, as well as the members of the working groups, also examined certain matters and exchanged opinions, as well as hands-on experience with regard to the concrete issues raised by correspondence (a written procedure).
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At the end of the year, the incumbent president of the Legal Committee resigned from the position of both the member and the president of the Committee since her employment at the bank was terminated.
C o m p l i a n c e C o m m i t t e e The members of the Committee vested with general responsibility to oversee that operational and legal compliance, as well as sound business ethics, are duly observed, watched closely and discussed certain issues about which they also exchanged their experience from practice and they took note of the information of the Bank of Slovenia referring to the system for reporting breaches under Article 239 of the Banking Act (Zakon o bančništvu – ZBan-2). Furthermore, the Committee members were informed about the results of the survey conducted by the Bank of Slovenia with regard to compliance issues and frauds. The Committee members also addressed the issue of the length of time for keeping, that is, storing data in banks and took note of the letter sent by the Information Commissioner with regard to the issue of providing adequate information when personal data of customers have to be obtained and the disputed practice where banks have access to and process personal data referring to the immediate family members of their potential borrower held in the central credit register.
Within the framework of the issues addressed by the Compliance Committee there were also other current issues. Moreover, the Committee members prepared the programme for the conference of compliance officers that was organised also in 2018 in co-operation with the Slovenian Insurance Association.
At the end of 2018, the representatives of banks and savings banks involved with all types of business, i.e. bank fraud, got together and exchanged experiences and views regarding those issues.
ANTI-MONEY LAUNDERING AND ETHICAL BEHAVIOUR AREA
C o m m i t t e e f o r E t h i c a l B e h av i o u r The Committee tasked with ethical issues relating to banking was established in 2018. At the first meeting of the new Committee, its members adopted two decisions. In the first decision, the members of the new Committee proposed to the Supervisory Board of the Bank Association should discuss point 4.2 of the Code of Banking Practice and, should it be necessary, propose to the Annual General Meeting of the Bank Association of Slovenia to pass a resolution containing either an
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interpretation of or amendment to the Code that also refers to business ethics of the Association’s members, and to draft bespoke rules for the work of the new Committee that would take into account its specific position in relation to other committees of the Bank Association. In the course of 2018, no breaches were reported that would fall within the scope of the powers vested in the new Committee.
A n t i - m o n e y L au n d e r i n g C o m m i t t e e (AML C o m m i t t e e ) The term of office of the Committee responsible for the field of anti-money laundering expired at the end of 2017 and the mandate in the fight against money laundering and terrorist financing was bestowed to the newly appointed and re- appointed members with a four-year tenure. At the first meeting convened in the year 2018, the Committee members concurred that the incumbent Committee president shall continue to serve as president also in the new term.
The members of the AML Committee discussed a series of key topics for regulatory and supervisory attention. The focus of the topics covered was on the outstanding issues with regard to the implementation of the Prevention of Money Laundering and Terrorist Financing Act. To that end, the opinions and practices were exchanged within the framework of the activities carried out by the Committee with regard to the most prominent issues such as, for instance, bearer’s sharer, beneficial owners, blocking access to a safe deposit box, putting in place the controls for screening data relating to transactions in order to be compliant the requirements laid down in Regulation (EU) 2015/847 of the European Parliament and of the Council of 20 May 2015 on information accompanying transfers of funds and dealing with the questions of the Committee for Documentary Operations with regard to bank trade finance instruments in relation to money laundering issues.
The Committee prepared proposals for modifications and amendments to Articles 27 and 32 and some other articles of the Prevention of Money Laundering and Terrorist Financing Act, and forwarded them to the Office for Money Laundering Prevention and to the Bank of Slovenia (keeping copies of official personal documents in electronic form, establishing and verifying customer identity by using video electronic identification systems, determining politically exposed persons, establishing the beneficial owner of a legal entity, issues arising from use of crypto currencies, …).
Whenever concrete issues emerged, the Committee members reacted fast and exchanged information.
The Committee members met at one of its meeting with the representatives of the Office for the Prevention of Money Laundering and the Police with regard to the
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exchange of information relating to the cases of fraud, primarily with the view to taking appropriate measures. Furthermore, they got together with the representatives of the Commission for Prevention of Corruption (KPK) to discuss the issues relating to the transmission of data and information to the KPK.
Since the traditional 2017 Annual Conference of AML/CTF Compliance Officers had to be rescheduled to spring 2018 as requested by the regulators, that is, supervisory authorities who had other commitments, the event took place last year.
BANK PRODUCTS AND SERVICES FOR RETAIL CONSUMERS
R e ta i l B a n k i n g C o m m i t t e e In the course of 2018, the centre stage activity carried out in the retail banking sector was the implementation of the General Data Protection Regulation on data protection and privacy for all individuals (GDPR) that necessitated alignment with the new requirements governing the protection of consumer personal data. To that end, the working group that operates within the Committee’s framework prepared the forms for customer consent for the purposes of direct marketing, as well as the necessary clarifications in connection with the personal data processing for marketing purposes and in co-operation with the PR group also prepared a video clip on the advantages consumers have in case they grant consent to receive ads sent to them for the purposes of direct marketing. In addition, the representatives of the working group participated in the preparation of a bespoke e-learning programme serving to train bank employees so that they are able to act in line with the new requirements related to personal data protection.
The Committee tasked with various aspects of the retail banking landscape was above all active in the area of monitoring and apprising the developments with area operations with bank customers – individual consumers. To that end, the Committee members also worked together with the Ministry of Finance, Ministry of Justice, Ministry of Public Administration, Information Commissioner, Ministry of Labour, Family, Social Affairs and Equal Opportunities (MDDSZEM) and the Slovenia’s Consumer Association. With a view to improving co-operation and clarifying outstanding issues, a special theme meeting was organised so that the Retail Committee members could meet face-to- face with the representatives of the Slovenia’s Consumer Association. The topics on the agenda mostly referred to approvals of quick loans or instant approval loans and the automated access to the SISBON records for the purpose of granting borrowing of a small amount of money. Both such personal loans and the use of automated
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underwriting systems are present, banks find that risks inherent in such lending vary, certain risks are even lower. The possibilities for abuse and errors are by definition lower with computer generated loan underwriting decisions. Both sides agreed to continue to work on keeping the constructive dialogue open and to co-ordinate with all actors and stakeholders in effort to arrive at an adequate legislative solution to the issues raised in that field.
The Committee members examined the proposals and materials drafted and submitted by the member institutions, that is, by the Committee’s working group or which were a consequence of legislative changes in the field of safeguarding personally identifiable information (ZVOP-2) and/or safeguarding consumers from fraud and unfair business practices (ZVPot). Among other issues, the Retail Committee also addressed the also refinancing and forbearance of consumer mortgage loans and suppling preliminary information to customers in connection with the new terms and conditions, and raised voice in favour of a standardised, uniform notification to delinquent borrowers (only the outstanding loan portion shall be taken into account). The Committee co-ordinated with the Bank of Slovenia the penetration of the payment account with basic features, best practice for banking operations and other related matters. The Committee members also engaged in the discussion regarding the obligation to obtain the figures for the expenses consumers incur when taking out housing loans in accordance with Article 10 of the Consumer Credit Act (ZPotK-2) and its implementation on the ground. To that end, the issue of verification of the authenticity of customer consent and in connection with that, also the verification of the authenticity of the data provided by customers.
It is noteworthy that the members of the Retail Committee reviewed various opinions provided by the Information Commissioner (IP), in particular the opinion on the transmission of information regarding a borrower’s employment by the Health Insurance Institute of Slovenia (ZZZS). That the Financial Administration of the Republic of Slovenia (FURS) would be granted a mandate to supply employment-related data to SISBON for natural persons (individuals) was also identified as a possible solution since it would enable banks to verify a customer’s employment status based on objective data. In addition, the Committee addressed the issue brought to the fore by the Information Commissioner: access to processing the data for the immediate family members of a potential borrower retrieved from the Central Credit Register. The dilemma was resolved once it was established that in such cases banks obtain a prior client consent.
The Committee members kept abreast of the activities connected with drafting the green paper on retail banking, the initiatives given at the EU-level in the area of
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financial exclusion, household over-indebtedness and promoting savings by vulnerable consumer groups. They also took note of the proposed changes to the EU consumer rights directive concerning disputes when the consumer and trader involved are based in two different European countries buy a faulty product and take class action (as in the case with Volkswagen), and mandatory labelling of different variants of the same product (as in the case of food products).
The Committee also followed the drafting of the EBA guidelines that bear on payment accounts with basic features and the treatment of over-indebted consumers, as well as the preparation of the Regulatory Technical Standards (RTS) on notifications sent to customers in connection with payment accounts. With a view to the preparation of uniform notifications on aggregate expenses for bank services at the annual level that credit institutions are obligated to send to their customers once a year in accordance with the requirements set out in Directive 2014/92/EU on payment accounts (PAD), a working group was established for the implementation of PAD and they prepared basic interpretations of the regulatory technical standards. They also asked the Bank of Slovenia for clarifications for certain issues that raised dilemmas and thus facilitated the work of the credit institutions to prepare the IT support for sending first notifications to customers scheduled for, that is, after 1 November 2018 with the entry into force of that requirement. Within the framework of the Committee the issue of reporting on personal accounts of customers – citizens of the EU Member States in accordance with the Payment Accounts Directive was also discussed after few banks had received a request for reporting by the Central Bank of Ireland. The Retail Committee members also took care of the survey on the implementation of the Payment Accounts Directive passed on to the Bank Association by the Ministry of Finance.
Besides, the members of the Retail Committee attended the meeting with the representatives of the Ministry of Labour, Family, Social Affairs and Equal Opportunities (MDDSZEM) to examine the possibilities for upgrading the eSociala system. In order to fulfil the obligation to justify allocation of public funding and social transfers, it would be necessary to provide the figures for account balances for the preceding 13 months (and not only to look into the current balance on a beneficiary’s bank account). To that end, banks and savings banks were asked to share their views regarding the proposed upgrade and the reporting system. Most credit institutions agreed with the upgrade, but it would also entail additional costs for them for the implementation of a new technology platform.
The Committee also actively engaged in the issue of digital transformation of bank services and primarily with the issue of remote identification of customers. Acting on the initiative launched by AJPES, a central public database on business entities,
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the Committee’s representatives participated in the work of an ad hoc group tasked with seeking a solution to the problem of erroneous reporting of transaction account (TRR) details to the Transaction Accounts Register. Namely, it was found out that many entrepreneurs were opening personal accounts for business purposes and the bank approached with a request for account opening was not able to tell in that initial phase that it would be used as a personal and a business account. Consequently, the account is not assigned the correct code, which in practice may lead to difficulties given the fact that the account is not listed in the public section of the register. A problem is also encountered when the concerned bank does not have in its offer accounts (and application to support statutory reporting in relation to such accounts) that would also enable such accounts to be used also for business transactions. Namely, in accordance with the new 6th paragraph of Article 192 of the Payment Services, Services of Issuing Electronic Money and Payment Systems Act (ZPlaSSIED), banks have the obligation to provide information that a customer’s transaction account is also used for the pursuit of an activity. In connection with that, the opinion of the Bank of Slovenia was obtained in which it was stated that a bank may, in case that it does not have in its offer the adequate account, terminate the business relationship with the aim to comply with the requirements laid down in legislation.
At the request made by different housing funds with regard to the access to the data/ information relating to eligible persons as laid down in Article 11 (a) of the Housing Act (Stanovanjski zakon), the representative of the Bank Association participated within the framework of the working group on the Ministry of Public Administration. The Bank Association coordinated with the Association of Asset Management Companies to endorse the initiative of the Ministry of Public Administration with regard to formalising terms and conditions for access to the data already collected within the framework of the eSociala system serving the purposes of various other entities bound to submit and/or provide information and which on a daily basis contact the credit institutions asking for the data on customer assets.
The Committee members also examined potential initiatives serving to incentivise long-term savings of natural persons (individuals) in the light of the fact that currently the number of sight deposits at the Slovenian credit institutions keeps rising.
Moreover, within the framework of the area of retail operations, the scope and content of information to be encompassed in the guide through e-services for senior citizens prepared within the framework of the worldwide project for e-education for seniors prepared by the Slovenian association eSeniors, which is part of the global movement. The Bank Association will participate in the project by preparing and editing the content relating to the banking area.
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Also, in the course of 2018, the members of the Committee reached an agreement concerning the opening hours of branches of banks and savings banks on 24 and on 31 December 2018 (until 12 o’clock noon) and disseminated information to the general public trough the Bank Association of Slovenia.
THE WORKING GROUP FOR SECURITY OF PERSONS AND PROPERTY The members of the working group tasked with protection of banks took care of the implementation of the recommendations that apply to the area of physical protection – best banking practice for the protection of banks and savings banks – working hand- in-hand with institutions from that area (the Bank of Slovenia, Police, Chamber for the Development of Slovenian Private Security), shared experience and made proposals for defining new standards in that area (cash transport, fire safety). The work on the revision of the document containing the minimum recommendations for security of banking operations in the area of the protection of persons and property continued also in 2018. The members of the working group also responded to the questions asked in a short survey on the attacks on ATMs conducted with the aim to design measures that based on the respondents’ answers would help the member institutions to act pre-emptively and be better prepared for such attacks in the future. The findings and the conclusions drawn from them were reviewed at a special workshop. In the course of 2018, the working group members continued to carry out the activities in connection with the certified transmission of alarm signals (IP Infranet) and discussed the Rules on the transport and protection of transport of cash and other valuables. Furthermore, they coordinated with the Chamber for the Development of the Slovenian Private Security to prepare an initiative for amending the Rules on the transport and protection of transport of cash and other valuables in the section that deals with the implementation of the standard for tracking and tracing cash.
WORKING GROUP FOR THE IMPLEMENTATION OF GDPR The working group was established for the purpose of the preparation of uniform forms (templates) for customers and common dissemination of information to customers on the changes introduced under the new legislation in the personal data protection field. The working group members formally wrapped up their work in spring 2018 when the aforementioned forms, explanations, leaflets for customers containing a snapshot of the requirements set out in GDPR and a video clip on the same topic were released. However, it soon became clear that there was still much work ahead as it was necessary to continue to exchange experience and also additional tasks were identified; hence, the working group members continued to discharge tasks within the framework of the Retail Committee. Thus, they drafted uniform clarifications serving to dispel the dilemmas the members of the working group encountered and prepared the forms/templates for the statutory assessment of the effects certain
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services have on safeguarding data, as well as the form/template for the legitimate interest assessment (LIA template). Moreover, within the framework of the working group, the opinion regarding the application of legitimate interest for direct marketing was prepared with the aim to help the members of the Bank Association to decide whether the legitimate interest basis is likely to apply to their processing. By adopting a uniform position on relation to that issue, the banking sector speaks with one voice when it comes to carrying out marketing activities on the basis of legitimate interest. The core working group actively participated together with the representatives of the Bank Association also in the course of the preparation of the training programme for the employees of banks, savings banks and leasing companies on the topic of personal data protection. They also coordinated with a sister working group set up within the framework of the Chamber of Trade and Industry to draft comments on the new Personal Data Protection Act. The Bank Association teamed up with the Chamber of Trade and Industry to propose to the Ministry of Justice to include their experts in the process of drafting the new law.
WORKING GROUP FOR THE IMPLEMENTATION OF PAD With a view to disseminating uniform information to customers on fees for using the main services linked to payment accounts, a working group was established. The purpose the regulator had in mind with the fee information document was also to help account holder to compare the fees of one account provider with those of other accounts. To that end, the working group prepared draft fee information document templates in accordance with the regulatory technical standards. With the aim to treat all the possibilities available in the same manner as much as possible, the members of the working group also prepared the explanations to accompany the forms/templates and approached the Bank of Slovenia with the request to provide further clarifications.
BANČNI VESTNIK
In the course of 2018, the Slovenian journal that that offers coverage of banking and financial topics was published in 12 issues of which eight were single monthly publications and two were double issues. The Editorial Board of Bančni Vestnik identified the topics for the international edition released on 15 November 2018 featuring the articles written by international and national experts that cast light on “Banking of the future: Technology, Regulation, Products or Customers?”. By choosing this theme, the Editorial Board wanted the special issue to contribute to the heated debate about the perspectives for the banking industry, the analysis of the environment in which credit institutions and other service providers would act and expert ranking of possible alternatives in terms of their impact.
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With a view to promoting transparency and keeping abreast of the mainstream international developments the Editorial Board shortlisted the candidates for the International Editorial Board subsequently appointed at the meeting of the Supervisory Board of the Bank Association held in December. The International Editorial Board will assist primarily in the course of the preparation of the international editions. Acting at the international level is expected to facilitate the task of getting listings for Bančni Vestnik in more international bibliographical databases. Furthermore, the Editorial Board endorsed the initiative to provide a digital edition of the journal – a step that should expand the circle of readers and eventually improve the visibility of Bančni Vestnik and increase its popularity by reaching more readers. To that end, the selected provider of IT support started during the year under review with the preparation of the technological solution for the transition to digital publishing.
TRAINING CENTRE
In the course of 2018, we worked on achieving the objectives connected with the core activity of the Training Centre of the Bank Association of Slovenia: vocational education and training in the area of banking and finance, activities in the area of financial literacy, accreditation of the training programmes at the European and at the national levels and the transfer of then testing of knowledge for stockbrokers from the incumbent provider to the Bank Association of Slovenia. The activities were running in accordance with the programme set out in the Catalogue of Training Programmes and the Plan of Work for the Year 2018 discussed and adopted by the Training Committee and endorsed by the Supervisory Board of the Bank Association and amended in the course of the year with new content and activities.
In 2018, we provided supplementary vocational education and training both in traditional forms (seminars, schools, workshops, expert panels, conferences) and as on-line learning (e-education). We organised 38 education, that is, training activities executed 69 times and attended on 243 training days by a total of 2,724 participants, of which 1,069 in e-programmes.
During the year under review, we carried out ten new professional training programmes not featured in the Plan of Work for 2018, and namely: three seminars (the new legal framework in the area of payments, Assessment, monitoring and management of risks arising in relation to financing real estate projects, Preparatory seminar for stock- exchange examinations), e-training programme (GDPR and personal data protection), two gatherings of professionals (described in the text below), three examinations for stockbrokers (A, B and C) and a workshop for teachers participation in the European
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Money Quiz. We were also actively involved with the traditional event when the Ljubljana Stock Exchange opens its door to the public.
When it comes to the traditional forms of education and/or training, most vivid interest was once again demonstrated for the theme conferences and other professional gatherings. At 16 professional gatherings, of which five two-day events, we had a total of 874 participants from the member institutions of the Bank Association, financial and other organisations, regulators, supervisors, ministries, government offices and agencies, audit firms…. In previous years we organised three separate conferences (Conference on Payment Transactions, Conference on Card Operations and the Conference on Retail Banking), in 2018, we merged them under a single theme into the Conference on payment services. We organised two new professional gatherings and namely one looking into propensity to assume risks in banks we carried out in co-operation with the Bank of Slovenia, the representation office of the European Commission in Slovenia, the EBRD and the other one presenting the latest developments and trends in the area of payments in the EU, the activities and the role of the European Payments Council when we hosted Mr. Goosse Etienne, Director General of the European Payments Council. Also in 2018, among the most visited events was the Day the Slovenian Bankers when the high-profile participants were also the representatives of the European Banking Authority, of the European Banking Federation, of the Central Bank and of the Ministry of Finance, the Conference on detecting and preventing money laundering we were already organising for a number of years in co-operation with the Office for Money Laundering Prevention and the Bank of Slovenia, the Conference on Payment Services, the Banking Conference in June and the Conference on managing risks in banks.
Carrying out all three longer forms of education/training were scheduled and namely: The Banking School, Payment Transactions and Financial Analysis of Companies. For the purposes the preparation for lectures and examinations, the participants received student materials in the electronic form.
For the participants of the 2018 Banking School, we prepared student material as scripts titled »Banking operations«. The content of the script also encompasses all learning objectives that have to be mastered in order to obtain the European Foundation Certificate in Banking. We also carried out all the necessary activities for the fulfilment of the criteria for performing examinations under the EFCB standard exam model. The European Banking & Financial Services Association awarded to the Training Centre of the Bank Association of Slovenia on 30 November 2018 accreditation for awarding banking qualification »Triple E European Foundation Certificate in Banking (Triple E EFCB).
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Among the latest developments in the rea of education and training during the year under review, noteworthy is the mandate given by the Securities Market Agency to the Training Centre of the Bank Association of Slovenia in 2018 to perform examinations that tests professional knowledge of stockbrokers from the incumbent provider the Association of the Stock Exchange Members to is. A contract on collaboration was signed, the examination board and the examination commission were appointed, the Rules on the manner and the criteria for testing knowledge required to work as a stockbroker and the list of the study material for the examinations were approved. Complying with the wish of the member institutions, we also organised a preparatory two-day seminar for stockbroker examinations. In connection with running the examinations, circulating relevant information and communication with the Securities Market Agency, as well as with the protection of the personal data of the candidates, additional activities are running with the aim to align the IT support for the operations of the Training Centre. The examinations for 48 candidates at all three levels: A, B and C were carried out on 21 November at the Faculty of Economics.
Thus we carried out in 2018 the tests of professional competencies for seven training programmes: Banking School, Payment Services, Exchange Transactions and for the participants of the workshop about recognising whether banknotes are genuine and fit for circulation, as well as three examinations testing stockbroker competencies: for the staff executing orders (A exam), for investment advisers (B exam) and for engaging in customer financial instrument administration (C exam). There were 20 examination dates on which the candidates took the examinations in a traditional way with 339 candidates. Testing the obtained knowledge was also an integral part of the programmes carried out in the form of e-learning courses.
In the e-education form, we carried out in the course of 2018 three programmes: Information security at workplace, Consumer credit for real estate purchase and the new programme relating to GDPR and personal data protection. The content of the training programme was prepared by the deputy of the Information Commissioner and we made the necessary adjustments and added cases from practice to meet the needs of the users from the banking sector. After successful testing in the summer months, the programme was again available to the users from September onward. We published invitation to candidates to enrol in 160 education/training days of e-learning held on ten times, in which as many as 967 participants took part in on-line, that is, e-education. The greatest interest was still shown for e-programme Consumer real estate financing attended after one year and a half on ten occasion by almost 2,000 participants. The members also demonstrated interest for the e- programme in the area of anti-money laundering that has to be revised in accordance with the provisions laid down in legislative acts adopted in spring 2018. With the Bank of Slovenia and the
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Office of the Republic of Slovenia for Money Laundering Prevention, it was agreed that the updated programme would be available in the first quarter of 2019.
In the area of financial education, intense preparations were launched under the coordination of the European Banking Federation for the execution of the project known as The European Money Quiz. The purpose of the project is to inspire interest in young people to learn about credit institutions and what the financial industry can offer by deploying an up-to-date approach thanks to smart phones and/or personal computers. The target group is the young 13 to 15 years old. At the Training Centre of the Bank Association of Slovenia we embarked on the project in October 2017 and made the necessary arrangements for the use and testing of the mobile application Kahoot! platform. In the first quarter of 2018, we continued the preparations and had the instructions for the use of the application for teachers and students, as well as the questions for the preparation for the quiz translated and published on the website of the Bank Association. The quiz questions referred to the notions about savings, debt, investments, interest, inflation and information security. We also organised shooting in a classroom to show in Infodrom broadcast by RTV Slovenija how the preparations for the quiz were running. In co-operation with the Centre of the Republic of Slovenia for Vocational Education, we agreed with eight primary schools from different parts of Slovenia for the pilot project execution. At the national competition held on 15 March 2018, as many as 135 students took part. The winner was Dravlje Primary School and represented Slovenia at the final competition held on 7 and 8 May in Brussels. The national quizzes in all participating European counters were played directly in a live Kahoot! webcast on You Tube.
As it was the case already for a number of years, we were active also during the European Money Week conducted in 2018 under the auspices of the European Banking Federation from 12 to 18 March designed to reach young people with actions to boost financial literacy. We continued with the activities also in April and May 2018.
Alongside the pilot running of the European Money Quiz, we organised a round table: »Projects for promoting financial literacy in the financial sector«. Then event was attended by the representatives of the Bank of Slovenia, Ministry of Finance, National Education Institute of the Republic of Slovenia, Centre of the Republic of Slovenia for Vocational Education, Consumer Association of Slovenia, Ljubljana Stock Exchange, Securities Market Agency, Insurance Supervision Agency, Association of Investment Fund Management Companies, the representatives of the member institutions and of the Bank Association of Slovenia. We agreed to continue our co-operation with the aim to boost financial literacy of the population and agreed that due to the fast
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development of technology, particular attention shall also be dedicated to financial education of senior citizens.
A workshop was organised at the primary school in Ilirska Bistrica in co-operation with the Bank of Slovenia with the aim to teach children to tell false euro banknotes from the genuine one and to show them which banknotes are “fit” for circulation and which are not. The presentation of the topic of cash authenticity and fitness was adjusted to the young as target audience. For the students of the Secondary School Josip Jurčič from Ivančna Gorica we organised a lecture at the Bank Association on banking activity in general and the role of the Bank Association of Slovenia in particular. The representatives of the class also tried hand at financial matters by using mobile applications.
In co-operation with the Centre of the Republic of Slovenia for Vocational Education, we carried out lectures for the students of the secondary schools. The gathering was attended by more than 90 students of the Biotechnical Centre Naklo, Secondary School and Grammar School of the Biotechnical Training Centre Ljubljana, Food Technology School and Secondary School for the Media and Graphics Ljubljana. At the end of the lectures. We tested the knowledge of finance-related topics acquired by means of a mobile application to carry out a quiz. The response was highly positive, and it demonstrates that by deploying different, more modern approaches, we can raise interest in young people also for the topics from the world of finance. Financial knowledge is indispensable; however, surveys indicate that there is shortage of such knowledge when it comes to knowledge and management of personal finance and, consequently, inadequate financial decisions are taken.
With the theme-focused lectures, we also took part in the week of the open door of the Ljubljana Stock Exchange to talk about banking and the role of the Bank Association of Slovenia in financial sector, as well as the wider economic environment. Moreover, we presented to pupils and students the learning platform serving to test their knowledge by taking part in a quiz to demonstrate their financial knowledge and build awareness of the importance of financial literacy as laid down in the European Money Quiz.
Within the framework of the activities carried out during 2018 by the Bank Association of Slovenia in the area of financial education, 624 pupils and students from different Slovenia’s regions in Slovenia, of which 600 were informed about the possibility of gaining financial knowledge through the Money Quiz. The European Money Quiz, a financial education initiative by national banking associations in Europe under coordination by the European Banking Federation, was recognised as the best 2018 Trade Body Campaign in Europe in the Brussels awards ceremony hosted by the Public
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Relations and Communications Association. The European Money Quiz was praised as a project that managed to make a significant impact on a relatively low budget. More than 41,000 schoolchildren from 25 countries in the age group between 13 and 15 years took part in the European Money Quiz by playing the online quiz.
The international co-operation: we attended the General Meeting of Members and the meetings of the Board of Directors of the European Banking and Financial Services Training Association (EBTN) in March in Belgrade, in June in Budapest and in November in Milan. We participated in the project team for financial education under the auspices of the European Banking Federation. In January 2018, we attended the meeting of the project team for the European Money Quiz in Brussels, in May we were at the FEPG meeting on French Banking Federation and the Global Symposium on financial education in the organisation of the OECD in Paris. On the invitation of the EBF, we attended the conference Global Challenges and Perspectives in Financial Education in November in Milan.
T r a i n i n g C o m m i t t e e The members of the Training Committee discussed and adopted the Catalogue of Training Programmes of the Training Centre of the Bank Association, took part in drafting proposals for new programmes and for amending the current ones, in evaluating more important education/training programmes and drawing up programme for the high-profile gatherings of HR and education specialists. At the Committee meetings, the members discussed the activities of the Training Centre in relation to the procedures and activities to obtain the EBTN accreditation for the programme Banking Operations. In connection with that, they discussed and submitted their comments regarding the content of the Rules for carrying out the Triple E EFCB examinations. The Committee also addressed the activities undertaken with the aim to transfer the examinations for stockbrokers from the Association of the Stock Exchange Members to the Bank Association of Slovenia. The Committee discussed the initiative for the preparation of an e-education programme in the area of personal data protection and monitored the activities conducted by the Training Centre in relation to the project. The Committee members also examined other issues such as the bank officer profiles in short supply in banks, financial literacy for the elderly, the Bank of Slovenia’s initiative with regard to reporting a breach of legislation related to personal data protection. They also took note of the activities conducted by the Association within the framework of the European Money Week and reviewed the joint report on the activities carried out by the participants of the round table “The projects designed to boost financial literacy in the financial sector”. A special meeting of the committee was dedicated to the alignment of the operations of the Training Centre to the GDPR requirements and the exchange of positions of the member institutions in
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connection with transmitting the personal data of their employees. In July 2018, the Committee got a new president, Ms. Zorica Jerič, the head of the Training Centre of Nova Ljubljanska Banka.
LEASING OPERATIONS IN 2018
In terms of its visibility and public perception, unlike the situation in 2017 when the KDS Leasing case cracked wide open affecting the leasing business that attracted negative media attention, during the year under review, there were no significant examples of negative perception. Nevertheless, the media did publish on several occasions the allegations that consumer legislation in connection with the information to be furnished beforehand was bypassed, but we can say that they fell on barren ground and had not negative consequences for the industry image. On the other hand, such allegations gave us the opportunity that we also exploited to explain once again to the representatives of consumer organisations the specific nature of financing through leases. At that time, such financing was always linked to a concrete object of financing and in that respect, it could not be the same as the practice of general bank financing transactions the media and consumer organisations used for comparison. There was no opposition to such valid and directly related reason.
The day-in, day-out leasing business results show, however, that it is necessary to preserve visibility and positive perception also in the roll out of the business as the core function. Thus, once more upon the implementation of the Directive on Insurance Distribution (IDD) it emerges that even insurance undertakings as eligible companies and big partners of leasing companies are not fully acquainted with the nature and the role of (financial) leasing as source of financing.
In the leasing business area, we witnessed once again how the relevant trends in 2018 had as their consequence an impact on the membership. It is worth mentioning that the leasing companies were selling their portfolios, some leasing companies changed hands, some members decided to streamline their business and specialise, other members opted for changing their business models, we witnessed the winding up of some leasing companies, etc. and it all had as the envisaged consequence a cut back in the number of members as it eventually did take place. On the other hand, new actors entered the market to pursue the business of leasing firms and they showed interest for co-operation within the framework of the Association, even though they have in place a specific business model, that is, a specialised subject matter of operations. Those firms expressed interest to become members and we are to expect that the circle of members shall increase. A similar process of corporate marriages, that is, taking up
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and pursuing the business of leasing firms has also been happening on the side of the banks, which means that the topics addressed on both sides of the Association’s membership often overlapped (consumer protection, money laundering, the central credit register, etc.). Therefore, with the aim to streamline the support provided to the operations of the members of the Bank Association of Slovenia, we have addressed to the banking part of the Association’s members an open invitation to sit at the table and examine the proposal for rationalisation of operations. However, the talks held still have not produced a final answer. Thus, the issue of the membership of banks and bank leasing companies in membership and work of the Leasing Committee in covering a part of their operations that refers to the leasing business and, consequently, to their financial participation in it.
Automotive leasing area: In the most important asset category – car leasing – there were no new relevant legislative changes. The activities continued with regard to two initiatives launched with the aim to facilitate co-operation with insurance undertakings: the so-called vinculation of insurance indemnity and the web-based service to gain access to the database containing own vehicle AO insurance. As far as »vinculation« is concerned, the preparation of the text was already in the final phase and the document only had to be signed, but then, just before signing, a problem with the communication interface surfaced since the leading insurance undertaking was de facto setting up an alternative interface instead of the Association’s ZBS B2B interface; therefore, we went ‘back at the drawing board’ to re-start the alignment process. Thanks to the progress made, testing phase with two insurance undertakings kicked off in the course of the year under review. As far as the website service designed to provide access to the database with AO own vehicle insurance, it was agreed with the insurance undertakings to notify the Information Commissioner. However, the rules set out in the General Data Protection Regulation (GDPR) with a new way of thinking followed in the approach to working out a solution to the matter that was still not in force derailed the agreement and, as a consequence, the activities ground to a halt. In connection with implementation of Directive (EU) 2016/97 on insurance distribution (Insurance Distribution Directive or IDD), even before its implementation in the national legislation, problems arose in practice and namely with the interpretation of the role of leasing undertakings in relation to insurance coverage (the insurer, the insured, identifying the needs) also due to the fact that in the past the insurance undertakings were in such a position that they could ‘drag their feet’ when it came to taking steps on the basis of our calls to clarify the relations. In the light of the fact that changes to insurance legislation were still in the parliamentary pipeline, we continued to discuss with insurance undertakings the possibilities for introducing solutions to our mutual benefit that would provide for security of business transactions and objective coverage of insured assets.
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AMLCFT area (Anti-money laundering and combating the financing of terrorism): The Office for Money Laundering Prevention prepared and submitted for discussion the draft guidelines for the providers of credit and credit intermediaries and we then sent our comments. When the Guidelines were published in November 2018, we saw that our key remarks had been taken into account. The work on the implementation of the Guidelines on the ground continued as well as the preparations for training courses designed to meet the needs of the leasing business as laid down in law and in the Guidelines.
Personal data protection area: The provisions set out in General Data Protection Regulation (GDPR) applied for the first time in May 2018 and the new Personal Data Protection Act (Zakon o varstvu osebnih podatkov – ZVOP-2) entered the legislative procedure. However, following the resignation of the Slovenian Prime Minister ahead of general election, the draft law was withdrawn from the adoption procedure. Nevertheless, the work continued separately and together with the colleagues from banks in the area of the implementation of the GDPR requirements and we are to expect that it shall continue also in the future given the number and complexity of the questions asked in connection with its implementation.
Tax and accounting area: The year 2018 was no exception when it came to the opinion given to the Financial Administration of the Republic of Slovenia (FURS) with regard to contract termination and VAT charged in such cases even though it was in general in the line with our agreement with the FURS. The difficulties arose again from the way in which contracts were terminated, since the situation on the ground differed from the situation referred to in the opinion. In connection with that issue, the European Court of Justice handed down its interpretation responding to a complaint lodged by one of the members and then also the national court gave its ruling. Nevertheless, the substance of the matter still remains unresolved. With regard to the court preliminary rulings so far, it is to be expected that the VAT treatment for leasing companies should be even more favourable than it is at present based on the opinion of the Financial Administration of the Republic of Slovenia (FURS). Questions were also asked in connection with the collision between DFS and VAT where it was explained and clarified that it was necessary to take into consideration how a transaction is carried out and the actual situation. After long years of discussions and numerous drafts, the new accounting standard IFRS 16 - Leases was adopted and its provisions also have an impact on the operations of the leasing companies and the companies that use rentals or leasing as a means to obtain access to assets. With the entry into force of the agreed anti-avoidance measures introduced under the Anti-Tax Avoidance Directive on 1 January 2019 in the Corporate Income Tax Act, we should expect the work in the area of taxes charged on interest income between associated companies and thin
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capitalisation rules to gain momentum. Nevertheless, the Ministry of Finance decided that the implementation of those two sections of the Directive would be delayed to just before the year 2024, that is, to the beginning of 2022. Nevertheless, we co-operated with the colleagues from Belgium to explore the possibility for the implementation of the Directive for the area of leasing business and delivered a presentation with the cross-section of the situation and the possible solution in line with the rules laid down in the Directive with the outsourced advisers (PWC).
Prudential reporting: In 2018, reporting was running without any problems worth mentioning. The issues raised on one or on the other side were dealt with immediately. The Bank of Slovenia was sending return information on a quarterly basis collected and aggregated on the basis of quarterly reporting by the leasing companies. The reports were published with a delay that was becoming shorter and shorter in the course of the year, just like it was envisaged by the Bank of Slovenia in proportion to the progress they managed to achieve with the standardisation of data processing on their side. We also discussed with the Bank of Slovenia and the Statistical Office of the Republic of Slovenia the possibility of using the reports provided to the Bank of Slovenia also for the needs of the national Statistical Office, since it would eventually lead to the elimination of additional reporting to the Statistical Office of the Republic of Slovenia performed under the current arrangement. Possible solutions were also sought in connection with the identified extension of the period of lease finance that does not reflect the actual situation.
Proposals for legislation improvement and monitoring: The changes to insolvency legislation referring to leasing transactions under consumer credit operations obviously inspired some insolvency specialists to consider the possibility for implementing changes also to the general treatment of the leasing business as »mutual failure to fulfil bilateral contracts«, which was highlight in general terms as the top priority for making changes at the gathering of professionals by the president of the Chamber of Insolvency Administrators of Slovenia. However, no concrete steps were agreed, let alone taken. In connection with individual legal instruments under the effective insolvency legislation, we warned against abuse associated with those instruments and, in particular, in the light of the preparations for the recently presented proposal of the EU directive under which an opportunity should be given to those who went bankrupt to try again – to get a second chance. In relation to that stance, we argue that at the same time, a reform of the entire Slovenian insolvency legislation shall be undertaken given the fact that it is too complicated and lacks any semblance of logic. The statistics of the Bank of Slovenia continues to show that the penetration of the leasing business in the real estate area remained shallow also in the course of 2018. Nevertheless, there is still a percentage of leasing firms that provide finance also for
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real property purchases and real estate portfolios from lease contracts concluded in the past. Therefore, we watched closely also the developments in that area and paid particular attention to the drafts of new legislation related to the taxation of real estate – the area co-ordinated over the past years with the Ministry of Finance where we agreed to exempt the leasing companies as taxable persons in cases in which real property is financed by leasing.
In the area of financing consumers, questions were asked in connection with the implementation of GDPR, reporting to the SISBON system and fulfilling the requirements for the submission of prior information. We were solving the current questions regarding GDPR and continue to solve as they appear together with our colleagues from banks. We wasted no time in addressing the unresolved issue of the new reporting to the SISBON system with regard to the newly prescribed covenant that it should be done immediately after closing a deal and we are still seeking solutions that would be in line with the purpose for which the changes were made in the first place, but that would not be an unproportioned burden on the reporting entities. In connection with the reprimands of the consumer organisations claiming that the leasing companies allegedly failed to observe legislation prescribing the obligation to furnish information in advance, it was eventually explained to them that leasing is not general financing but financing that by definition is provided for the purchase of an asset designated beforehand; hence when potential customers send an enquiry without specifying what the object of financing would be, they cannot get answers they are used to obtaining when they turned to banks for financing also in the case of a personal loan. The matter of the fact is that the leasing companies always abide by the effective consumer legislation when they get a specific enquiry for financing also when they provide preliminary information as established also by the market inspection reviews conducted on a regular basis.
In accordance with the provisions set out in the Central Credit Register Act (ZCKR), the remaining leasing companies had to sign up within one year in the section that refers to consumer financing and those companies complied within the stipulated time frame. In that context, they had to deal the emerging issues we dealt with together. In the section that refers to the corporate financing, they would be sign up within four years at the latest on the basis of the issued legislative acts of the Bank of Slovenia even though, according to the available information of the Bank of Slovenia, it is still not the turn of the leasing business to join. With the Bank of Slovenia/SISBON/ZCKR and the Ministry of the Interior together with the banks negotiations were running with regard to automated and rational acquisition of data from the population register on the basis of the authorisation of the member institutions of the Central Credit Register – ZCKR system under Article 16 of the Central Credit Register Act (ZCKR).
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The time schedule for reporting to the SISBON system was reviewed and agreed and it should apply from 15 March 2019 onward. However, it raises quite a few practical issues related to its implementation and we are dealing with them together with the members, IT support providers and SISBON.
Extrajudicial dispute resolution: In the course of 2018, there was only one complaint filed by a consumer that initiated the proceeding against the cited leasing company.
Statistics: The agreement with the Bank of Slovenia that on the basis of the data provided under the statutory reporting by the leasing companies it would additionally process and released the data containing the elements required for each reporting category as prescribed by the European Federation of Leasing Company Associations (Leaseurope) has been carried out on a regular basis. Also due to the fact that the data are official figures of the members of the Eurosystem and have to be verified in advance by the competent functions of the Bank of Slovenia, the results are available over longer periods than we were used to in the past, that is, with a half month delay. Since changes were made to the leasing business model and, as a consequence, statistical fluctuations were identified and envisaged on that basis, we proposed to the Bank of Slovenia to amend the statistics so as to encompass under the leasing operations also the lease transactions concluded by banks in the same format as such transactions are disclosed and reported by the leasing companies. What the Bank of Slovenia did in 2018 was to blend the data reported by banks as an aggregate report that displays cumulative, final volumes. Nevertheless, for more segmented reporting performed according to the reporting model used by Leaseurope, it would be necessary to reach a voluntary agreement with the concerned banks to draw up reports as requested by Leaseurope. No such agreement was reached in the course of 2017. Looking forward to the expected expansion of leasing operations in banks, both in terms of volume and the number of banks that take up and pursue the leasing business within the framework of authorisation issued to banks, this issue is poised to loom large in near future.
International co-operation was running during the year under review primarily with the European Federation of Leasing Company Associations – Leaseurope. The focus of attention was on the comments relating to the drafts of the European legislation and compliance with the reporting obligations for statistical purposes. We also participated with Leaseurope with regard to the problems identified in relation to the implementation of the European directives in connection with consumer credit and the questions asked about the new accounting standards, as well as about the directive on having a second chance expected to be adopted soon and the implementation of anti-money laundering and terrorist financing rules in practice. Additional communication was
Annual Report 2018 65 The Bank Association of Slovenia
running additionally with some of its members (Austria, Italy, Germany) with regard to the comparison of the implementation of legislation based on the European directives and attempts of the Slovenian administration to put in place »higher standards« than the European legislative acts envisage, and such treatment is usually less favourable for reporting entities. In addition, we participated with the colleagues from Belgium in the area of the implementation of the Council Directive (EU) 2016/1164 laying down rules against tax avoidance practices that directly affect the functioning of the internal market.
Last year, after a gap of a several years, a successful leasing day was organised once again. It was the motivation for the organisation of such an event also this year. The activities for the organisation were launched, but the event fell through since it would mean an additional burden on the Training Centre of the Bank Association of Slovenia with the newly assumed education and training in the area of stockbrokers and consequently several programmes could not be organised among which also the Leasing Day. It is planned and expected that it will eventually take place in the course of 2019.
66 Annual Report 2018 The Bank Association of Slovenia
MEMBERS OF THE BANK ASSOCIATION OF SLOVENIA*
Banks and savings banks
Abanka d. d. Addiko Bank d. d. Banka Intesa Sanpaolo d. d. Banka Sparkasse d. d. BKS Bank AG, Bančna podružnica Delavska hranilnica d. d. Ljubljana Deželna banka Slovenije d. d. Gorenjska banka d. d., Kranj Hranilnica Lon d. d., Kranj Nova Kreditna banka Maribor d. d. Nova Ljubljanska banka d. d., Ljubljana Primorska hranilnica Vipava d. d. Sberbank banka d. d. SID – Slovenska izvozna in razvojna banka, d. d., Ljubljana SKB banka d. d. Ljubljana UniCredit Banka Slovenija d. d.
Leasing companies
BKS-Leasing d. o. o. DBS Leasing, d. o. o. GB Leasing, d. o. o. NLB Leasing d. o. o. – v likvidaciji Porsche Leasing SLO d. o. o. RCI Banque, bančna podružnica SKB Leasing d. o. o. SKB Leasing Select d. o. o. Sparkasse Leasing S, d. o. o. Summit Leasing Slovenija d. o. o. VBKS Leasing d. o. o. Kranj
*As at 31 December 2018.
Annual Report 2018 67 The Bank Association of Slovenia
PROFESSIONAL TEAM OF THE BANK ASSOCIATION OF SLOVENIA*
mag. Stanislava Zadravec Caprirolo, Director mag. Kristijan Hvala, Head of Banking Economics Area Karmen Strgar, Office Secretary Aleksandra Žibrat, Editor of Publications and Internet, PR Coordination Boris Bajt, Head of Leasing Area Novica Novaković, Head of Legal Office Borut Tomažič, Payment Services Specialist Azra Beganović, Administrative Clerk
Bančni vestnik Mateja Lah Novosel, Editor-in-Chief of Bančni Vestnik, Journal for Money and Finance
Izobraževalni center Viljenka Markič Simoneti, Head of the Training Centre Ksenija Jaklin, Training Area Assistant
*As at 31 December 2018.
68 Annual Report 2018