Serbia – Central bank reportedly planning to have banking sector set up an independent fund to deal with problem loans

On 27 November the newspaper “Novosti”, citing a professor of banking in Belgrade, revealed that the National Bank of Serbia (Народна банка Србије) is planning to have an independent fund be established to track and deal with problem loans in Serbia.  According to Assoc. Prof. Boško (Branko) Živanović of the Belgrade Banking Academy (Beogradska bankarska akademija), the National Bank wants the banks themselves to set up such a fund, since at present the low credit rating and the fiscal difficulties of the government itself make it infeasible for such a fund to be set up under public direction.

According to Prof. Živanović, the problem of non-performing loans in Serbia is far more serious than official statistics indicate.  Although the National Bank’s statistics indicate an overall rate of NPLs of 19.9%, he states that among loans to businesses the rate exceeds 25%, and in the agricultural sector it exceeds 50% for certain banks, while in the construction sector reliable figures are impossible to come by because many failing construction firms have been merged with other companies.  He judges that the banking system itself is in no danger because both capital adequacy (17%) and loss reserves (120%) are sufficient, but notes that the second tier of foreign-owned banks have worse problems with NPLs than do the state-owned banks because the excessive number of commercial banks present in the market has led to undue competition in expanding loan portfolios.

Source: Banke osnivaju fond za rizične (2012-11-27 21:03)

Mark Pleas

Eastern Europe Banking & Deposits Consultant

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