The Slovak central bank announced on Tuesday the countercyclical capital buffer for commercial banks will rise to 1.50 percent from August 1, 2019, the second such increase aimed at cooling fast credit growth. The buffer, under which banks set aside capital when the economic cycle is strong to prepare for future downturns, has been at 0.5 percent of their risk-weighted assets since August last year.
The central bank had already announced in July last year that the buffer would rise to 1.25 percent next month. Two years ago Slovakia became the first euro zone country to introduce the buffer, seeking to tame a double-digit rise in lending fuelled by record low interest rates and a hot real estate market. Only a handful of other European states have the charge, including the neighbouring Czech Republic.
Banks have one year to prepare for the next rise. With the sector showing an average capital adequacy ratio of 18.6 percent in 2017 - several percentage points above requirements for most lenders - they should have no problems meeting that.
Slovenska Sporitelna, Slovakia's biggest bank which belongs to the Austrian group Erste Bank, said it had been expecting the rise and would be ready for it.
The central bank had hinted at a further increase in May. According to its latest data, loans to households grew 13.6 percent year-on-year in the first three quarters of 2017, the fastest rate in the euro zone.
Much of the lending is for home purchases. The central bank is phasing in a limit on mortgage loans at eight times a borrower's annual income and has banned loan-to-value credit exceeding 90 percent as of this month.
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