Serbia’s C-bank Moves To Help Banks Remain Solvent Amid Global Crisis

The central bank, NBS, will also implement short-term measures next month in an effort to help banks stay afloat during the crisis, the NBS vice-governor Mira Eric-Jovic told a news conference.

NBS will temporarily relax its reserves requirement against general banking risks for banks with annual lending growth of more than 15%, Eric-Jovic added.

Last week, NBS welcomed an initiative by the country’s four largest commercial banks to ease loan repayment plans, saying this move would boost liquidity and customer confidence in local banks.

The Serbian subsidiaries of Italy’s Intesa Sanpaolo and Austria’s Raiffeisen Zentralbank and Hypo Group Alpe Adria as well as domestic bank Komercijalna Banka proposed earlier this month to abolish taxes for early loan repayment except when it is refinanced in another commercial bank), and, on customer demand, extend repayment deadline by up to a year, convert foreign currency loans into Serbian dinar loans and Swiss franc loans into euro loans.

The four banks hold a combined share of 50% of Serbia's banking market, Eric-Jovic told the news conference.

In October, NBS introduced a number of measures aiming to boost the liquidity of the banking system amid the global financial crisis and alleviate the burden currently borne by Serbian commercial banks. It scrapped its mandatory reserves requirement for banks' fresh borrowing in foreign currency retroactively from October 1 and increased to 20% from 10% the share of mandatory reserves on foreign currency deposits, which banks have to maintain in Serbian dinars. Banks in Serbia previously had to maintain in euro 90% of their mandatory reserves on foreign currency deposits and the remaining 10% in dinars.

Referring to recent NBS interventions in support of weakening Serbian dinar Eric-Jovic said: “The central bank will continue to intervene in the foreseeable future with the same objective of supporting the dinar.”

NBS has sold 501 million euro ($645 million) in October and November to prevent an excessive drop of the dinar. The dinar reached a fresh historic low of 89.50 per euro on Tuesday.

(1 euro = 88.9678 Serbian dinars)