December 10 (SeeNews) - The level of non-performing loans (NPLs) in the Serbian banking sector fell by 0.8 percentage points on the quarter to 22% at the end of September, the National Bank of Serbia (NBS) said.
Total gross NPLs in the Serbian banking sector amounted to 425 billion dinars ($3.8 billion/3.48 billion euro) at the end of September, down by 13.4 billion dinars from the previous quarter, the NBS said in a banking sector report issued on Wednesday.
The level of corporate NPLs amounted to 49.4% at the end of September and was down from 51% from the end of June, while the same indicator for household loans increased to 17.4% from 17.1%.
The Serbian government agreed with the International Monetary Fund (IMF), after the signing of an 1.2 billion euro ($1.3 billion) stand-by agreement (SBA) in February, to form a special group for the resolution of NPLs and to develop a strategy for that purpose in June.
After performing a diagnostic examination of the Serbian banks as part of activities in the field of financial supervision agreed in line with the SBA, NBS said last week that the country's financial system is solvent, liquid and stable and that the high NPL ratio still does not represent a risk as the banking sector is capable of absorbing these potential losses.
In April, the Serbian central bank said after a meeting with the IMF, the World Bank, the European Bank for Reconstruction and Development and the International Finance Corporation (IFC) that the NPL resolution must be financed by the private sector with the public sector providing support through regulatory incentives.
In May, the International Finance Corporation launched together with the Serbian government a programme to improve the country's insolvency system, reduce risks and boost lending in the Eastern European country.
The IFC-backed programme is expected to make the debt resolution system in Serbia more efficient by improving the insolvency frameworks and practices, which will mean stronger NPL prevention and resolution as well as increased returns to creditors and greater protection for economically viable companies.
By end-2014, the share of NPLs in Serbian bank portfolios had reached 21.79%, up from 16.7% in 2010, undermining bank earnings, capitalization, and ability to extend new loans.
(1 euro=122.155 Serbian dinars)