Banking System in the Slovak Republic:

 Structure categorized into:

 Single Stage: Central bank provides all banking functions (monobank system).
 Multistage Bank System: Number of stages varies with the economy's complexity.
 Slovakia has a two-stage banking system:
 First Stage: Central bank - National Bank of Slovakia.
 Second Stage: Comprises commercial banks.
 Origins of the two-stage system date back to the 17th and 18th centuries, when money
issuance was concentrated within specific banks.
National Bank of Slovakia (NBS):
 Independent central bank, top-tier institution in the banking system.
 Slovakia joined the Eurosystem on January 1, 2009, part of the European System of
Central Banks (ESCB) within the Eurozone.
 Primary objective: Maintain monetary stability.
 Key functions:
 Participates in the common monetary policy established by the European Central
Bank (ECB) for the entire euro area.
 Issues euro banknotes and coins following specific regulations for the euro area.
 Manages and disposes of foreign reserve assets and conducts foreign exchange
operations in accordance with Eurosystem regulations.
 Supervises the financial market.
 Ensures the smooth operation of payment systems and clearing systems, focusing on
efficiency and economic effectiveness.
 Verifies the authenticity of banknotes for the public.
 Acts as the state's bank and serves as the bank for other banks.
 NBS collaborates with law enforcement agencies and international organizations to
combat counterfeiting and protect the integrity of the Euro. Provides information,
guidance, educational materials, and training on detecting counterfeit banknotes and
coins, including security features of genuine Euro banknotes.
Commercial Banks:
 Legal entities headquartered within Slovak Republic, incorporated as joint-stock
companies with authorization to receive deposits, provide loans, and engage in
financial activities.
 Permission to conduct banking activities granted by the National Bank of Slovakia
(NBS).
Main Activities of Commercial Banks:
 Receiving Deposits:
 Deposits are sums of money placed in a bank by depositors. The bank becomes a
debtor, and deposits represent a liability.
 Providing Loans:
  Loans are sums of money provided by the bank to clients in exchange for
compensation, typically in the form of interest or charges, for an agreed-upon period.
The bank acts as a creditor and sets interest as the cost of borrowing for the debtor.
 Other Activities:
 Commercial banks offer various financial services, including:
 Payment services and accounting.
 Investment services to assist clients in managing finances.
 Trading activities, handling securities, coins, and commemorative banknotes.
 Foreign exchange services to meet currency exchange needs.
 Issuing and managing payment instruments like bank cards and checks.
 Financial leasing services for clients seeking to lease assets.
 Mortgage operations, including loan origination and management.
 Providing guarantees and assistance in opening and securing letters of credit for
international transactions.
 Offering consulting services to help clients make informed financial decisions.
 Safekeeping of valuable assets with safe-deposit boxes.
 A diverse portfolio of financial services, including banking information and more.

Bank Secrecy:
 All bank employees must maintain confidentiality regarding non-public client
information.

Receivership:
 Commercial bank operations are supervised by the NBS. Breaches can lead to
measures imposed by the NBS, including the most severe actions like receivership
and the withdrawal of permission for banking activities.

Classification of Commercial Banks:

 a) According to the Range of Provided Services:
 a1 – Universal Banks: These banks offer a wide range of banking activities.
 a2 – Specialized Banks: These banks focus on specific banking activities.
 b) According to Ownership:
 b1 – Privately Owned Banks
 b2 – Publicly Owned Banks
 b3 - Banks with Mixed Ownership

Passive Bank Operations:

 Passive bank operations are integral to a bank's financial activities.
 These operations are termed "passive" because the bank is the recipient or debtor in
most transactions.
 Their primary purpose is to accumulate the necessary financial resources for the bank
to conduct its core functions, including lending, investing, and providing financial
services.
  Passive bank operations focus on acquiring resources needed for the bank's
entrepreneurial activities, with the bank taking on the role of a debtor.
 These resources form the bank's passive assets, comprising:
 Own Resources of the Bank (8% of Total Assets): Sourced from shareholder
contributions.
 Foreign Resources of the Bank (92% of Total Assets): The majority, 92%, of the
bank's total assets are composed of foreign resources.
 This structure is vital for a bank to offer essential financial services and maintain its
financial health.

Active Bank Operations:

 Active bank operations involve activities where the bank takes on the role of a
creditor, influencing the volume of active assets.
 These operations typically come after passive bank operations and use acquired funds
for ongoing business activities.
 Key components of active bank operations include:
 Credit Operations (Classical Active Operations): These operations extend credit to
borrowers, offering various types of loans and credit facilities.
 Investment Operations: Banks engage in investment activities, such as managing
investment portfolios, investing in financial instruments, and providing investment
advisory services.
 Active bank operations are at the core of a bank's business model, driving its financial
performance and enabling it to serve as a financial intermediary in the economy.
 The success of these operations relies on the bank's ability to manage risk, offer
quality services, and adapt to changes in economic and financial conditions.
Credit Operations of Commercial Banks:
 In credit operations, commercial banks lend money to clients in exchange for an
agreed-upon charge over a specified period.
 The bank takes on the role of a creditor, while the client becomes a debtor.
 Lending money allows banks to earn interest income, a significant revenue source.
Types of Loans:
 1st - Short-Term Loans:
 Authorized Overdraft: A short-term loan allowing an account holder to withdraw
more money than their account balance, often within an agreed limit.
 Advance on Security: A short-term loan extended with collateral or security
provided by the borrower.
 Acceptance Credit: This includes:
 Discount Credit: A short-term loan where the bank purchases a bill of exchange at a
discount from its face value, providing immediate funds to the bill's holder.
 Cash Credit: A short-term loan allowing the borrower to withdraw cash up to a
predetermined limit.
 Avail Credit: A form of short-term credit provided to meet specific financing needs.
 2nd - Mid-Term and Long-Term Loans:
  Issued Loan: A mid-term or long-term loan provided by a bank to borrowers for
various purposes, often with fixed repayment terms.
 Loan on Bond of Credit: A loan granted against the issuance of a credit bond,
typically used for medium to long-term financing.
 Mortgage Loan: A long-term loan secured by real estate, usually used for purchasing
or refinancing properties.
 Consumer Credit: A type of mid-term or long-term loan provided to individuals for
personal expenses, such as buying a car, home improvement, or education.
Investment Operations of Commercial Banks:
 Commercial banks allocate their financial resources into securities or real estate
investments.
 Banks manage investment portfolios on behalf of clients, invest in financial
instruments such as stocks and bonds, and offer investment advisory services.
 Gains from investments, as well as fees for asset management, contribute to a bank's
earnings.
Foreign Exchange and International Banking:
 Banks engage in foreign exchange operations, facilitating currency exchange for
international trade and investment.
 They offer services such as currency conversion, trade finance, and international wire
transfers.
Payment Processing:
 Banks provide payment processing services, enabling customers to make transactions
through various means, including checks, electronic funds transfers, and credit/debit
card payments.
 Banks may charge fees for these services.
Wealth Management Services of Banks:
 High-net-worth individuals and institutional clients often rely on banks for wealth
management services.
 These services include investment planning, estate planning, and other financial
advisory services.
Banking Risks:
 Banking risks encompass various types of risks faced by banks and financial
institutions during their operations. These risks can be categorized into internal and
external risks.
 A) Internal Risks:
 Internal risks are those that the bank has a degree of control over and can be
influenced by its decisions. They include:
 Credit Risks: The risk associated with borrowers defaulting on their loans or credit
obligations.
 Risks of Equity Holding: Risks linked to the bank's investments in equity securities.
 Payment Risks: The risk of payment failures or disruptions in the bank's payment
systems.
 Technical and Technological Risks: Risks stemming from technology failures or
vulnerabilities in the bank's systems.
 Management Risks: Risks associated with the bank's management decisions and
practices.
 Liquidity Risks: The risk of insufficient funds to meet short-term obligations or
cover unexpected cash outflows.
 B) External Risks:
 External risks are beyond the direct control of the bank and often result from external
factors. They include:
 Political Risks: Risks arising from changes in government policies, regulations, or
political instability.
 Territorial Risks: Risks associated with the geographic locations in which the bank
operates, including geopolitical conflicts or natural disasters.
 Currency Risks: Risks linked to changes in the value of foreign currencies, affecting
international transactions and investments.
 Exchange Rate Risks: Risks stemming from fluctuations in exchange rates that can
impact the value of foreign assets or liabilities.
 Interest Rate Risks: Risks resulting from changes in interest rates, affecting the
bank's profitability and the value of its assets and liabilities.