National Bank of Serbia says 2015 marked by stability - Priorities for 2016 unchanged

It was the year of low and stable inflation. The rate of inflation never exceeded 2.1% y-o-y, while at the same time, despite numerous challenges, relative stability of the dinar exchange rate was successfully maintained. Also, thanks to NBS measures, dinar loans became much cheaper – in the year to October, interest rates on new dinar loans were reduced from 16.9% to 13.2% for households, and from 10.9% to 7.5% for corporates. In 2015 alone, the NBS trimmed its key policy rate in seven steps – from 8% down to 4.5%, thereby creating conditions for a further decrease of lending rates and the recovery of credit activity, which, in turn, underpinned a rebound in economic activity.

As in earlier years, the NBS took special care to maintain the stability of the financial system. Owing to its well-timed measures and coordination of steps with the European Central Bank during the Greek crisis, banks in Serbia continued to operate smoothly and without any problems. In 2015 we successfully completed the special diagnostic studies which confirmed that the Serbian financial system is solvent and stable. The studies have shown that none of the banks tested had a capital adequacy ratio below the regulatory minimum of 12%, which is yet another proof of the high level of capitalisation of the Serbian banking sector.

Another significant engagement of the NBS in 2015 concerned the resolution of non-performing loans which ultimately led to the creation of the NBS Action Plan for Implementation of the NPL Resolution Strategy. One of the main goals of the Strategy is to boost credit activity, given that the planned measures lower the credit risk in the banking system, which should result in even lower interest rates and, consequently, support economic activity and sustainable economic growth.

Among the major achievements this year is the signing of a precautionary arrangement with the IMF and three successfully completed reviews of Serbia’s performance under the agreed programme thanks to concerted efforts of the Government and the NBS. A more than adequate level of foreign exchange reserves is an assurance of Serbia’s macroeconomic stability, and so is the fact that these reserves were reinforced this year with around 600 kilograms of gold.

Owing to the laws proposed by the NBS and applied as of this year, another big step forward was made in terms of modernising the national payment system. These laws increased both the security of clients and the efficiency of payment transactions, improved the protection of rights and interests of financial services consumers and introduced better and more efficient mechanisms for the protection of our citizens in the field of insurance. Amendments and supplements to the Law on Banks were also adopted, establishing an efficient and flexible bank resolution mechanism aligned with the best European and international practice.

In 2016, maintaining price and financial stability will remain on top of the NBS agenda as this is the best way for the central bank to contribute to a favourable business and investment environment, and hence to stronger economic growth, employment, and ultimately, better standard of living of all citizens of Serbia, the NBS release reads.