Adopted Reports on the Monetary, Foreign Exchange and Supervisory Activity of the National Bank of the Republic of Macedonia for the First Half of 2000
Skopje, 15 September 2000
Press release of the NBRM
Adopted Reports on the Monetary, Foreign Exchange and Supervisory Activity of the National Bank of the Republic of Macedonia for the First Half of 2000
On September 15, 2000 the National Bank of the Republic of Macedonia Council held its LXXXII session at which several reports and decisions from the monetary, foreign exchange and supervisory area where adopted.
The National Bank of the Republic of Macedonia Council adopted the Semi-annual Report of the Bank for the first half of 2000. In the first half of 2000, main monetary policy objective was to maintain price stability through a stable nominal Denar exchange rate against the German mark. The NBRM Council concluded that the increase in retail prices in the period January - June 2000 was higher than expected and was not a result of an influence of monetary factors. Namely, the increase in retail prices in the first six months of 2000 is primarily a result of the unexpected increase in the price of crude oil on the world markets. In the first half of 2000 the monetary policy acted in direction of restraining the unfavorable influence of non-monetary factors on the level of prices. Monetary aggregates achieved a relatively higher increase than projected, which was caused by the higher inflow of foreign currency on the foreign exchange market and the increase of deposits in the portfolios of commercial banks. During the first six months of 2000, the National Bank of the Republic of Macedonia purchased US Dollars 70,3 million on the foreign exchange market. As of June 30, 2000, foreign exchange reserves reached US Dollars 543,5 million, which represents coverage of 3.0 months of imports.
Simultaneously, in the first six months of 2000, the monetary policy thoroughly supported the high economic growth of the Macedonian economy. Namely, in the period January - June 2000, the total amount of banks’ credits extended to entities by the non-government (private) sector increased by Denar 3,728 million, or 10.6% compared to the end-1999. Contrary to the first quarter of 2000, when credit ceilings were still in effect, in the second quarter of 2000 the banks were in position to invest its overall credit potential in the economy. Banks’ liquidity in the first six months of 2000 was high, which resulted in a decline in the interest rate on the money market. Namely, the interest rate on the Money and short-term securities market equaled 11.2% p.a. and it was by 9.2 percentage points lower compared to the interest rate realized on the market in the same period of 1999.
The NBRM Council also adopted the Report on the Supervisory and Control Activities of the National Bank of the Republic of Macedonia in the first half of 2000. During this period, the Central Bank conducted the following activities related to the conduct of the supervisory function:
· 29 on-site supervisory examinations were conducted, out of which 15 were full-scope (8 banks and 7 savings houses), and 13 were partial supervisory controls (10 banks and 3 savings houses). One examination is still in progress;
· upon request of the World Bank, Arthur Andersen in cooperation with supervisory teams from the NBRM produced diagnostic studies for 4 banks, thus covering 34% of the banking system of the Republic of Macedonia.
The level of privatization of the banks in the Republic of Macedonia equals 80.4%, which compared to December 31, 1999, represents an increase of 3.6 percentage points. If the analysis excludes the two banks which are completely state-owned (“Macedonian Bank for Development Support” and the branch of “T.C. Ziraat Bankasi” from the Republic of Turkey), the level of privatization of the remaining banks in the Republic of Macedonia equals 90.6%, which is by 3.9 percentage points higher compared to December 31, 1999. Analyzed on a bank by bank basis, as of June 30, 2000, the level of privatization varies within an interval between 72.1% and 100% with 6 banks.
As of June 30, 2000, the share of foreign capital in the total founding capital of the banks in the Republic of Macedonia equals 33.3%, which represents a significant increase of 14 percentage points compared to December 31, 1999. The increase is a result of the admission of the foreign strategic investors in Stopanska Banka a.d. Skopje. Analyzed on a bank by bank basis, foreign capital is present in 15 banks, with share between 0.3% and 100%.
The indicators of profitability and efficiency of the banks in the Republic of Macedonia in the firs half of 2000 reveal that compared to December 31, 1999, there is a slight improvement in the profitability of Macedonian banks (of 0.5 percentage points) measured through the rate of return on assets. Namely, as of June 30, 2000, the rate of return on assets (ROA) equals 1.3%, which means that 100 units of assets of Macedonian banks generate 1.3 units of net profit. Macedonian banking system registers an improvement also in the rate of return on equity (ROE), which increased by 2.61 percentage points compared to December 31, 1999, and is within the framework of the internationally accepted standard varying between 5% and 10%.
Although insignificant, it is worth to emphasize the decline in the non-performing loans classified in the categories C, D and E in the total banks’ exposure, which was reduced from 41.3% (as of December 31, 1999) to 39.1% as of June 30, 2000. This suggests that the effects from the Kosovo crisis in the balance sheets of Macedonian banks, reflecting the situation within the enterprise sector as well, are being recovered at a certain dynamics.
The NBRM Council also adopted several decisions pertaining to the regular operationalization of monetary and foreign exchange projections and to the adjustment to the new Banking Law and the amendments to the Law on Foreign Exchange Operations. Namely, the following Decisions were passed:
· Decision on the methodology for determination of the guarantee capital of banks;
· Decision on amendments to the Decision on the manner and the conditions for purchase and sale of foreign currency conducted among legal entities in the Republic of Macedonia, according to which instead of 90 days, legal entities are allowed to keep the foreign currency inflow realized from collection of exports, up to 180 days, as a deposit with domestic banks authorized to conduct payment operations with abroad. Such a decision is directed towards higher liberalization of foreign exchange operations;
· Decision on amendments to the Decision on the manner and the conditions for conducting exchange offices operations, according to which the exchange offices operating on their behalf and for their account shall from now on offer their excess cash currency only to commercial banks and not also to the NBRM, as it has been the case so far.