At today's meeting, the Financial Stability Committee reviewed the latest developments in the banking system of the Republic of Macedonia.
At today's meeting, the Financial Stability Committee reviewed the latest developments in the banking system of the Republic of Macedonia.
It was concluded that, even under conditions of turbulent external environment and uncertainty about the debt crisis in the euro zone, banks retained their stability, maintaining high solvency and liquidity. Macedonian banking system has almost no dependence on sources of funding from foreign financial markets, which minimizes the danger of spillover of the current crisis developments in the euro zone, into the domestic banking sector.
Activities of banks continued to grow in the first months of 2012, with similar dynamics as during 2011. As of March 31, 2012, deposits amounted to Denar 237 billion and in comparison with March 31, 2011, they increased by 9.8%. Credit growth was slightly slower compared to the deposit growth, amounting to 8.3% (March 2012 compared to March 2011).
Banks maintained stable liquidity, and liquidity indicators increased. The share of liquid assets in total assets was 31.5%. The coverage of household deposits with liquid assets also increased, and at the end of March it was 61%. All banks meet the prescribed minimum liquidity ratios in the amount of 1, and stress-test simulations show resilience of the banking system to liquidity shocks.
In 2011, the level of risks to which banks are exposed in their operations are kept in a controlled framework. Certain increase in credit risk is noticed, but conservativeness and prudence of both the regulation and the banks provide full coverage of "bad" credits with allocated provisions. The share of nonperforming loans to total loans at the end of March 2012 was 9.9%.
The banking system has a stable and high solvency, which in the first months of 2012 was further strengthened. The capital adequacy ratio is twice higher than the prescribed minimum of 8% and as of March 31, 2012 it equaled 17.5%. Conducted simulations of hypothetical shocks showed that the banking system and individual banks are resilient to the impact of these shocks, and in none of the banks the capital adequacy ratio is reduced below 8%. The banking system's resilience is verified through simulations conducted to investigate the possible channels of transmission of the negative effects of the crisis in Greece and in the euro zone on the domestic banking system.
Also, at the meeting, the challenges for the Republic of Macedonia from the application of the latest changes to the capital and liquidity standards of the Basel Capital Accord, Basel 3, were reviewed.