July 3, 2018 / 10:05 AM / 9 months ago

Slovak central bank raises extra capital buffer for banks again to cool lending

BRATISLAVA, July 3 (Reuters) - The Slovak central bank decided on Tuesday to raise its countercyclical capital buffer for banks to 1.50 percent, effective from August 1, 2019, to boost resilience of the sector amid excessive loan growth.

Slovakia became the first euro zone country two years ago to first introduce the buffer that banks must maintain for tough times to tame lending, which has risen at a double-digit clip amid a period of record low interest rates.

Only a handful of other European states have placed the charge on lenders, including neighbouring Czech Republic - both battling hot real estate markets.

Slovak banks have had to meet a buffer rate of 0.5 percent since last August and that will rise to 1.25 percent in a month after the National Bank of Slovakia decided to raise the rate a year ago.

It hinted at a further increase in May to stay ahead of strong growth in lending to households.

According to the latest data from the regulator, loans to households in Slovakia grew by 13.6 percent year-on-year in the first three quarters of 2017, the fastest pace in the euro zone.

Much of the lending is going toward home purchases. The central bank is now phasing in a limit on loans at eight times annual income. It has banned loan-to-value credit exceeding 90 percent as of this month.

Slovakia’s banks, including CSOB, Postova Banka, Slovenska Sporitelna, Tatra Banka and VUB , are largely foreign-owned and have avoided troubles seen by other banks in Europe in the decade since the global financial crisis.

Reporting By Tatiana Jancarikova; Editing by Jason Hovet

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